Equities: Risk of renewed rates volatility – BNY

BNY strategist David Tam warns that a renewed rise in rates volatility, as measured by the MOVE Index, could pressure U.S. equities, particularly technology and growth segments. He says investors may need to reduce equity exposure, shorten portfolio equity duration and favor defensive sectors.

Equities increasingly tied to MOVE

“Since 2023, and more recently since 2025, rates volatility has also been much more consequential for equity markets than in the past.”

“The S&P 500 has been strongly negatively correlated with rates volatility at about -84%, as measured by the MOVE Index. This pronounced correlation persists across tech-centered equity market segments.”

“The Nasdaq (-83%), tech (-82%), and semiconductors (-73%) are reacting far more to bond market volatility than many investors are positioned for.”

“Investors should act now. That means expanding risk budgets, reducing equity exposure, or actively reducing the equity duration of their portfolios by changing their sector allocation or size/style emphasis.”

“If rates volatility rises from here, leadership could change quickly, and portfolios concentrated in growth could see sharper swings than investors have grown used to.”

“In particular, investors should favor defensive sectors with large cash reserves on their balance sheets and consistent all-market revenue.”

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