[Intro screen with title of video "2 Minutes on the Markets" is displayed]
Hi, I'm Kasey McCurdy, Chief Portfolio Strategist for Schwab Wealth Advisory.
[Chartbook with turning changes is shown]
In the latest Schwab Market Insights, three charts help explain the market setup heading into the second half of the year:
[Text displayed with checkmarks and text showing what's in the Schwab Market Insights: Stocks vs bonds, The scale of AI investment, Changing profile of high-yield bond market]
the relationship between stocks and bonds, the scale of AI investment, and the changing profile of the high-yield bond market.
[Area chart showing the rolling 30-day correlation between S&P 500 and 10-year Treasury yield.]
The first chart looks at the correlation between the S&P 500 and the 10-year Treasury yield. Recently, stock and bond prices have been moving more closely together because interest rates have become more connected with changes in inflation. That can be frustrating for investors who expect bonds to offset every move lower in stocks. But fixed income still has a role.
[Line chart showing AI-related business investments compared to all other business investments.]
The second chart focuses on AI investment. AI-related spending has become one of the clearest supports for business investment. That helps explain why markets have been willing to look past some economic concerns, but it also raises the bar. Investors are starting to focus more on the cost of the buildout — how much is funded through free cash flow, how much may require debt issuance, and whether future returns can justify today's spending.
[Line chart showing breakout of the Bloomberg US Corporate High-Yield Bond Index.]
The third chart is high yield. Spreads are tight, so investors still need to be selective. But the market looks different than it used to. Double B-rated bonds now make up more than half of the high-yield index, while lower-rated exposure has declined. That does not remove credit risk, but it does mean the asset class has a higher-quality profile than many investors may assume.
[Checkmarks with this text is displayed - The Bottom Line. Markets have had a strong run, Investors watching connected drivers: Interest rates, AI investment, credit quality]
So the takeaway is this: markets have had a strong run, but the next phase may depend on how investors price a connected set of drivers — interest rates, AI investment, and credit quality.
That's the value of Schwab Market Insights. It brings together the charts and commentary, so investors can see what is shaping markets instead of reacting to the latest headline.
That's your two minutes on the Schwab Market Insights.
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For more details, head to Schwab.com.
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