What the Data Says About Rates, Growth and Market Leadership: Insights from Denise Chisholm - September 3, 2026
A surge in Treasury yields to multi-year highs has revived concerns about inflation and contributed to a global bond sell-off. As investors consider whether central banks may need to keep rates higher for longer, Denise Chisholm, Director of Quantitative Market Strategy at Fidelity, argues that the forces behind rising yields may reflect economic strength more than mounting risk. Based on her analysis of historical data, her base case is that the secular bull market may still have further room to run.
Why higher rates do not have to rattle equities
According to Denise, growth rather than fear appears to be driving much of the recent move in interest rates. Durable goods orders, capital spending and profits are all growing at top-quartile levels, and historically stronger growth has been associated with a higher likelihood of Federal Reserve rate hikes. In her view, the reason rates are rising matters more than the move itself.
Historically, equity markets have generally been able to absorb higher interest rates when those increases are supported by economic growth. Denise characterized the 2022 market sell-off during the Fed's tightening cycle as unusual relative to historical experience. She suggested that some current market concerns may appear less significant when viewed in the context of the underlying data. If growth remains supportive, equities have historically had little difficulty with marginally higher rates.
Reading Bitcoin and Treasury Positioning
Bitcoin behaves less like an alternative currency and more like a leveraged play on equities, particularly technology stocks, according to Denise. She noted that historically Bitcoin has shown a strong relationship with subsequent interest-rate movements and has often been a useful indicator in her analysis. With Bitcoin trading at elevated levels, she believes the signal points to lower odds of further Federal Reserve rate hikes rather than higher odds.
Treasury market positioning tells a similar story. Net short positions in U.S. Treasuries, as measured by the Commitment of Traders report, are at historically elevated levels. Denise noted that periods of extreme short positioning have historically been associated with a greater likelihood of Treasury market rallies. More broadly, she argued that when a market narrative becomes widely accepted, there is a greater chance it has already been reflected in prices.
Deficits and the Limits of Econ 101
The commonly cited relationship between rising deficits and rising bond yields is not consistently reflected in historical data, Denise argued. She pointed out that deficits have shown little relationship with interest rates over time. She also noted that countries such as Italy and Japan have carried heavier debt burdens than the U.S. while maintaining lower government bond yields.
In her view, if debt levels were the dominant driver of yields, that relationship would appear more consistently across historical and cross-country data. The broader lesson, she said, is to be cautious about conclusions that seem self-evident. When an outcome appears certain enough to bet on, historical evidence may offer reasons for restraint.
The Case for a Durable Bull Market
Denise's base case is that the secular bull market will continue, largely because the current cycle has not experienced the kind of prolonged growth, excess or investor euphoria that have often characterized late-stage bull markets in the past.
Median earnings peaked in 2018. While earnings growth has been strong this year, it is only now returning to those prior highs after what Denise described as the longest cycle on record dating back to the 1960s.
That lengthy recovery may support the market's durability. Historically, she noted, longer periods required for earnings to reclaim prior peaks have tended to be associated with longer-lasting cycles. The seven-year recovery period for the median company therefore supports her view that the current cycle may still have staying power.
Momentum, Technology and Market Broadening
Momentum has recently emerged from what Denise described as its weakest five-year stretch on record relative to the broader market. At the same time, relative valuations have fallen into the bottom quartile. Historically, she noted, lower starting valuations have provided the most favourable setup for the factor. Based on that backdrop, she believes momentum and technology remain likely candidates for market leadership.
She emphasized that momentum is ultimately a measure of trend and that the composition of momentum strategies evolves over time. Today's leaders are not necessarily tomorrow's leaders, even if the factor itself remains attractive.
The discussion around market broadening does not diminish the case for technology, in her view. In a healthy secular bull market, what matters most is that a wide range of sectors participates in gains, not which sector leads at any particular moment. Denise sees favourable setups in areas such as industrials and metals and mining, particularly as manufacturing activity expands, while continuing to view technology as a leading area of the market.
What AI Capital Spending Signals
Technology capital spending has risen to roughly 7% to 7.5% of GDP from around 3% in the 1960s and has contributed significantly to economic growth in recent years. However, that spending has begun to slow. The bearish interpretation is that a slowdown in such an important growth driver could signal future weakness. Denise's analysis of historical data points to a different possibility.
Historically, periods when technology capital spending was elevated and then began to slow were often followed by faster GDP growth, stronger earnings growth and relative technology outperformance. Denise views technology capital spending as a potential leading indicator of future growth and believes the current slowdown could be an early sign of a broader and more durable cycle in jobs, profits and consumption if historical patterns continue to hold.
Conclusion: Optimism Grounded in the Data
Denise argued that current market data suggest the secular recovery may not yet be fully reflected in investor expectations. A key part of that view is the combination of wide equity valuation spreads alongside narrow credit spreads.
She noted that her outlook would become more cautious if that relationship were to reverse, with credit markets beginning to signal stress while equity markets remained complacent. Based on the data she currently follows; however, she does not believe that condition exists today. For now, her focus remains on what historical evidence and current market conditions are indicating.
