The 10-Year Treasury Pays 5.2%. The S&P 500 Only Needs 4% Earnings Growth to Keep Up.
2026-09-28 07:37
•Daniel Sparks •The Motley Fool
••• • Axe Cap view
US Yields Rise, What That Means for the Rand and JSE
With 10-year US Treasury yields hitting 5.2%, South African investors face important trade-offs between local equities and currency risks.
US 10-year yields at 5.23%—their highest since 2007—are shifting the global investment balance. While a 5.2% risk-free return is tempting, it forces a rethink around South Africa’s rand and equity markets. The S&P 500 needs just 4% annual earnings growth to compete; a goal it has historically met. But for us, the real story is the rand FX response. Higher US yields typically strengthen the dollar, pressuring the rand, and making rand-hedged global assets more expensive. This tends to weigh on JSE exporters such as AngloGold Ashanti and MTN, whose dollar-linked revenue can suffer in local currency terms, even as their earnings remain solid. Domestically, financials like Standard Bank and FirstRand may feel margin pressure if borrowing costs rise alongside global yields. Investors should be selective—prefer companies with strong dollar revenue streams or robust local franchises resistant to tightening conditions. The case for sitting out emerging market risk is real, but overstated if you can navigate currency volatility carefully. This view could falter if the rand unexpectedly strengthens or US growth falters, causing yields to retreat. this is just our opinion and not financial advice
Trim rand-sensitive exporters like MTN and AngloGold ahead of potential rand weakness. Instead, watch large banks with stable domestic earnings and hedge global exposure via US dollar assets selectively. Keep a close eye on USD/ZAR moves.
- USD/ZAR
- Standard Bank
- MTN
- Rand unexpectedly strengthens, easing pressure on exporters
- US growth slows, pushing Treasury yields lower
7/10
With 10-year Treasury yields at 5.23% (highest since 2007), the article compares this risk-free return against S&P 500 index fund investments. The S&P 500 needs only 4% annual earnings growth to match the Treasury's return over a decade, a threshold historically met in 80% of 10-year periods since 1950. While the Treasury offers immediate income, the index fund's earnings can compound long-term, making it preferable for investors with longer time horizons, though valuation multiples pose a key risk.
Our take is based on reporting first published by The Motley Fool.