This is the big risk that stock investors should be watching as rising bond yields menace markets

Rising global bond yields have unsettled equity markets, with investors focused on whether a sharp move higher could push U.S. stocks into correction territory. But strategists at BofA Global Research argue the more significant risk lies elsewhere, suggesting the yield spike itself may not be the primary threat to portfolios.

The distinction matters because bond yields and equity valuations are linked through the discount rate investors apply to future corporate earnings. When yields rise, that rate climbs, pressuring stock prices — particularly in rate-sensitive sectors. However, strategists point to a different vulnerability as the bigger concern, one that could prove more consequential than a straightforward yield-driven selloff.

For market participants, the takeaway is that headline yield levels deserve attention, but so does the underlying source of the pressure. What to watch: whether rising yields reflect stronger growth expectations or shifting inflation and policy assumptions, since those paths carry very different implications for equities. How the dynamic between bonds and stocks evolves in coming sessions may matter more than any single yield threshold.