Economics/Class Relations

Societe Generale’s Math Predicts Equity Market Chaos If Bond Yields Continue To Rise

By Dean Brooke, Rogue Economics


I originally wrote this piece as part of a much broader essay back in 2018 during the last tightening cycle and things have changed – A LOT – since then. I have had to source this retrospectively from the notes I retained at the time because some of the source material seems to have since disappeared from the internet (though I notice that other writers have since referenced it and so research can be carried out if you have a care to google this information) so, apologies in advance for the rather loose referencing and as always you can feel free to submit questions/leave comments and of course DYOR always applies. I plan to update this in the near future (2022) as we are obviously beginning another tightening cycle and I will add to this piece sometime this year as the situation develops.


The following chart is taken from Société Générale’s research into the sensitivity of US equities to a higher interest rate environment conducted in 2018.

Specifically, with respect to the rate on US government treasuries and how it affects equity markets.

Here are the notes from SocGen’s research, I’ll do my best to find an actual link to the source at a later date.

Fundamentally, Societe Generale research shows that the equity risk premium reduces exponentially for every 0.25% on the flagship 10year US treasury yield.


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