Renforth Resources Inc. (CSE: RFR, OTC: RFHRF)
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When the world’s safest long-term asset pays a 5.33% yield, it is hard for equity investors not to feel a chill. On August 18, the 30-year U.S. Treasury yield touched 5.33%, its highest level since June 2007. As of August 23, the yield had eased slightly to around 5.3%, but it has remained above 5% since early July. A swelling federal deficit and inflation that has stayed stubbornly above 2% are the primary forces pushing long-end rates higher.
For stock investors, a 5% risk-free rate carries an implied threat: future earnings are worth less in today’s dollars, because every valuation built on those uncertain, distant earnings must compete with the risk-free bond.
However, the historical record paints a picture far more nuanced than simply “high rates equal bear markets.” Tracking data from the U.S. Treasury’s 30-year yield series, which began in February 1977, the long bond’s closing yield never dipped below 5% from then through September 1998 — spanning nearly 22 calendar years and roughly 5,400 consecutive trading days. Over those 22 years (1977 through 1998), the S&P 500 delivered an average annual return of approximately 15.8% with dividends reinvested — enough to turn $10,000 into about a quarter of a million dollars. Only three of those 22 calendar years were negative. Moreover, the 30-year yield spent most of 1980 through 1985 above 10%, and still averaged more than 8% as late as 1990 — yet this did not prevent the greatest bull market in modern history from taking shape. From 1982 through the late 1990s, the S&P 500 compounded at roughly 18% annually, while the long bond never paid less than 5%.
But the same yield level also accompanied a starkly different outcome. From late 1998 through most of 2004, the 30-year yield again lived above 5% for most days. This time, over those six years, the S&P 500 returned only about 1% per year on average. This period included the dot-com bust of 2000 through 2002, when the S&P 500 lost roughly 37% of its value — the worst three-year stretch since the 1970s — and the long bond paid more than 5% for most of that decline.
Since then, 5%+ long-term yields have made brief appearances: April to August 2006 (the S&P 500 returned about 16% that year), May to July 2007 (peaking at 5.35%, slightly above this week’s high), as well as October 2023, twice in 2025, and a brief breach in May 2026. When the 2008 financial crisis struck, yields had already collapsed below 5% and kept falling — the crisis arrived with the bond in retreat, not on the attack.
Laying these periods side by side, one key conclusion emerges: the absolute level of long-term yields, by itself, decided almost nothing. Yields above 5% presided over the best two decades U.S. stocks have ever strung together, and also over the worst three-year stretch in a generation. What truly separated the outcomes was the starting valuation of stocks, not the bond yield. In August 1982, the S&P 500 traded at roughly 8 times earnings — the entire index looked like a value stock. In January 2000, however, it traded at 29 times earnings. The same bond yield can be weak competition for one market and stiff competition for another, depending on what investors are paying for the earnings on the other side.
Today, the S&P 500’s price-to-earnings ratio also stands near 29 times — closer to the extreme 2000 end of that range than to the 1982 starting point. This suggests that investors should not simply dismiss current market risks, but neither should they treat the yield itself as a sell signal; stepping out on that basis alone would have kept an investor out of the market for two extraordinary decades.
For investors holding the SPDR S&P 500 ETF Trust (SPY), which launched in January 1993 when the 30-year yield was 7.3%, the historical record points to a specific concern: U.S. stocks have compounded through long bond yields of 5%, 8%, and even 12% before. But they have never compounded from an expensive starting point without encountering a rough stretch along the way. The 19-year high of 5.33% is worth noting, and this level may well continue to pressure the market’s richest growth stocks. However, historical evidence suggests that a 5% long bond yield, by itself, has not been a reason to sell stocks — the price being paid for the stocks is the part that has truly mattered.
