In my view, three forces can hold back the rally in US stocks: the cost of money, slowing earnings growth and the supply of new shares. The first two are already at work; the third may be on its way.

The first force is interest rates

On Thursday, October 1, the yield to maturity on the 10-year US Treasury note touched 5.34%, the highest level since 2002.

The move was driven by oil at $100 a barrel, the US deficit and fears of new government debt issuance. In the background is the Federal Reserve, which raised rates on September 16 for the first time since 2023 and whose officials are signaling another hike before year-end.

To see why a higher rate weighs on stocks, start with the time value of money.

We all prefer to have $100 today rather than in ten years, because today’s $100 can be spent or invested right away.

At 5.3%, $100 arriving in ten years is worth $59.70 today: that is the sum which, invested now at that rate, grows to $100 in ten years. If the rate were 4.3%, the same $100 would be worth $65.60 today. One extra percentage point of rate therefore takes 9% off its present value.

Now run the same test on $100 arriving in two years instead of ten. At 4.3% it is worth $91.90 today; at 5.3%, $90.20. The same extra percentage point takes off less than 2%.

The rule is simple: the further away the money, the more a rate increase reduces its value today.

The price of a stock is, in essence, the present value of the profits a company will make in the years ahead. So when rates rise, companies promising the most distant profits, such as many technology and growth companies, lose more value, while those with nearer-term profits, often classified as value stocks, lose less.

The second force is slowing earnings growth

A stock’s price already contains, at least in part, the growth the market expects. The slowdown is expected too: analysts forecast S&P 500 earnings growth of 31.8% in 2026 and 15.2% in 2027. The pace halves, but everyone knows it.

The drag lies in what the slowdown takes away. So far, earnings have acted as a cushion. The price-to-earnings multiple tells you how many dollars you pay for each dollar of expected earnings: in April, for the S&P 500, it was 20.4; in mid-September, 19.1. Usually, when you pay less for each dollar of earnings, it is because prices have fallen. Not this time: prices have held, and the multiple fell because expected earnings grew faster, by about 7% more than prices.

That is why the index has stayed close to its highs.

With growth halving, the cushion shrinks, but it does not disappear. With earnings growing 15%, over the course of a year the price paid per dollar of earnings can fall by about one-eighth, from 19.1 to roughly 16.6, without prices ending the year lower. The margin, however, is half of what it is this year.

There is also a question of timing. The cushion works slowly, quarter after quarter, as earnings come in. The multiple, by contrast, can drop in a matter of weeks. In the meantime, prices can fall anyway.

If rates push the multiple down faster than earnings grow, or if 2027 estimates are revised lower, prices will pay the difference.

The third force is the supply of shares

For now it is more a threat than a drag. When new shares come to market, the money to buy them does not come with them: buyers have to find it elsewhere, often by selling other stocks.

On June 12, SpaceX raised $86 billion, the largest listing ever and almost triple Saudi Aramco’s $29.4 billion in 2019.

According to the financial press, other large listings tied to artificial intelligence are expected in the coming months.

A study covering the past forty years finds that big waves of listings do not mark the market top (only one mega-IPO in five coincided with a peak), but they do precede years of lower returns.

There is, however, a counterweight: US companies regularly buy back their own shares.

For 2026, estimates from a major investment bank point to buybacks of about $1.4 trillion, against new issuance of an estimated $700 billion. SpaceX’s $86 billion, the biggest listing in history, is worth about one-sixteenth of a single year of buybacks.

Today, therefore, more shares are leaving the market than entering it. This force becomes a drag only if new listings grow faster than buybacks.

The counterweight is fragile, though: companies buy back their shares when profits are abundant and stop when they fall. Precisely in moments of stress, when it would be needed most, it risks shrinking.

The comparison with government bonds

All three forces end up in the same comparison: the one with government bonds, which I covered in more detail last week.

On expected earnings over the next twelve months, every $100 invested in the S&P 500 buys $5.20 of forecast profits. Every $100 put into the 10-year Treasury buys $5.30 of promised interest.

The multiple in itself is not high: 19.1 times expected earnings, against a ten-year average of 19.0. What has changed is the yardstick: a year ago the 10-year yielded about 4.1%.

None of the three forces delivers a verdict on its own. But anyone holding stocks that promise profits far in the future is the most exposed to a 10-year yield that keeps climbing.

A US Treasury held to maturity returns a sum of dollars known in advance, although not protected from inflation, and it yields almost as much as the index’s expected profits in the first year. Stocks have an advantage that a government bond does not: their earnings can grow, even with inflation. But on first-year profits, the risk today is not paid for: it will have to be paid for by growth in the later years, precisely the growth that the first two forces can hold back.

Anyone who owns the index, then, is paid only if earnings keep growing. How certain is that?

Disclaimer

The information and considerations in this article should not be used as the sole or main basis for investment decisions. Readers retain full freedom over their investment choices and full responsibility for making them, since only they know their risk tolerance and time horizon. The information is provided for informational purposes only and its dissemination does not constitute, and should not be considered, an offer or solicitation to invest.

Editor’s note

This article was originally published in Italian on money.it by Guido Giaume on October 05, 2026 as «Le tre forze che possono frenare le azioni americane». It has been translated and adapted for an international audience by the Money.it International desk.