Rising interest rates have been in the headlines lately, and one of our clients recently shared a TikTok video comparing today’s market to 1987, the year of the Black Monday crash. It’s a fair question, and we want to share how we’re thinking about it.
Why rates matter to stock prices
The concern about rising rates is legitimate. Treasury yields serve as a “risk-free” benchmark in valuation models used to discount a company’s future cash flows. All else being equal, higher discount rates reduce the present value of those cash flows, putting pressure on stock valuations.
Putting today’s move in context
The 30-year Treasury yield has risen from about 4.8% to 5.67%. That’s a meaningful move, but not, by itself, a cause for panic. In 1987, the 30-year yield surged from 7.5% to a peak of 10.24%, an increase in percentage points roughly three times larger than the recent move.
We monitor market valuations daily. Exceptionally strong earnings growth this year has helped offset the pressure from higher yields.
What worried us in 1987
We understand why the comparison gets attention. In fact, Runnymede’s founder, Samson Wang, became concerned enough to raise significant cash for clients in August 1987, two months before Black Monday.
But rising interest rates alone weren’t what worried him. The U.S. dollar had fallen substantially, and he was concerned that foreign investors would sell U.S. stocks and bring their money home rather than continue absorbing currency losses. Currency pressure, rising rates, and a stock market that had already rallied sharply created a dangerous combination
Where we stand today
There are risks worth watching today, including the recent rise in rates and oil, which may be the biggest wild card. But we are not seeing the same combination of circumstances that preceded Black Monday, and strong earnings continue to provide support.
Higher rates warrant close attention, and we’ll keep monitoring them. We’d be cautious, however, about concluding that 2026 is shaping up to be another 1987.
As always, if you have questions about your portfolio or would like to talk through any of this, please reach out.
Feature image created by Claude AI
