Why stocks held up despite rising yields and $100 oil? These 2 words explain it

Investing.com -- Vital Knowledge said in a note Friday that two things explain why U.S. stocks have stayed steady this month despite a sharp rise in bond yields and Brent crude above $100 a barrel.

The firm noted that the S&P 500 is roughly flat so far in September, even as the 10-year Treasury yield has climbed about 80 basis points this month.

"Two words explain the discrepancy: TACO and Muse," they declared.

Vital Knowledge said many investors believe the rise in yields is hurting the White House so much that Trump will be forced to change course on Iran. That could drive down both oil prices and yields.

The firm partly agrees but has doubts. It said Trump does not fully control the situation, has backed down less often than the market assumes and seems less focused on daily moves in oil and yields.

"The Iran conversation is inaccurately framed as a binary – either things get worse, or they get solved," Vital Knowledge wrote. It sees the current situation as more likely to continue, “with low-level kinetic activity occurring occasionally and ongoing disruptions to energy supplies punctuated by ephemeral “deals”, w/Trump’s successor left trying to figure out an exit strategy.”

Meanwhile, Meta Platforms has added nearly $400 billion in market value since launching its Muse AI agent on Sept. 8. The resulting tech rally has offset some of the damage from oil and yields. The equal-weight S&P 500 and the Russell 2000 are both down more than 4% this month.

The firm warned that "the myopic focus on it is causing investors to ignore what has been a lot of negative news from the space in the last week."

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