Global markets are navigating a turbulent stretch as a surge in bond yields and climbing oil prices test investor resolve, yet many remain steadfast in their pursuit of returns. On Tuesday, the yield on the 10-year U.S. Treasury breached the closely watched 5% threshold, intensifying a global selloff in sovereign bonds, while international oil prices held above $100 per barrel amid supply disruptions linked to the conflict in Iran.

Despite the convergence of an energy crisis, spiking yields, and geopolitical shocks that have triggered repeated market swings, global equities have delivered robust gains this year. The S&P 500 is up over 10.8% year-to-date, the tech-heavy Nasdaq Composite has climbed 11.8%, and the Dow Jones Industrial Average has risen 8.4%. Beyond U.S. markets, South Korea's KOSPI, Japan's Nikkei 225, and Europe's STOXX 600 have also posted advances.

This week, the technology sector faced additional pressure as several leaders in artificial intelligence warned that the pace of AI development poses safety risks and requires safeguards. However, Bank of America's latest global fund manager survey, released Tuesday, reveals that a substantial number of market participants remain willing to commit capital to equities. The survey indicates that the "excessive optimism" seen earlier in the summer has faded, but investors still hold a broadly positive view on economic growth and corporate earnings, with most expecting sustained heavy investment in AI. The poll covered 170 investors managing a combined $470 billion in assets, showing that a net 49% of fund managers remain overweight global stocks—a slight dip from the previous month, though equities still rank as the most favored asset class for overweight positioning. Expectations for double-digit earnings per share growth over the next 12 months have reached their highest level since August 2021, and 38% of respondents anticipate a "boom" in the global economy next year. Meanwhile, bond allocations have dropped to their lowest point since May 2022.

Why BlackRock Stays Bullish on Stocks

BlackRock's Investment Institute argued in a Tuesday note that rising bond yields do not alter the institution's preference for risk assets, but rather "raise the bar for returns on investments." "High interest rates and a strong stock market are not necessarily contradictory; the key lies in what is driving yields higher," the firm stated. "If yields rise due to investment expansion and economic growth, the resulting earnings improvements can offset the pressure from higher capital costs. This is why we maintain an overweight stance on U.S. equities and AI-related sectors." The institution added, "We believe that even if the AI investment boom consumes capital, electricity, and other scarce resources, these investments can still support economic growth and corporate profits."

Tony Meadows, Chief Investment Officer at BRI Wealth Management, said in an email interview Tuesday that the market's "gold rush" mentality toward AI may leave investors periodically uncertain about what future they are betting on. "The current enthusiasm for AI data centers and supporting infrastructure appears almost limitless, but bottlenecks will eventually surface. Some industry revenue relies on circular dependencies, which makes the 'AI trade' inherently fragile," he noted. "For now, even if the market enters a period of reflection and adjustment, these debates are unlikely to completely end the AI theme. The AI rally will pause multiple times; whether it ultimately turns into a deep selloff depends on investor concerns about returns, capital availability, and the cyclical revenue models of some businesses."

Tej Stankia, Senior Investment Analyst for Impact Investing at Federated Hermes, believes the recent pullback in AI stocks offers a buying opportunity for long-term investors. "It is difficult to gauge how long this volatility will last. Short-term risk appetite is highly sensitive to macro factors such as interest rates, oil prices, and geopolitical conditions, and these external conditions have been unfavorable recently," he wrote in an email. "The expansion of AI data centers has consistently been constrained by shortages of key semiconductor wafers and power supply, and there are no signs these bottlenecks will ease in the near term."

Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, suggested in a Tuesday morning note that the real question for investors is not whether frontier AI technology development will slow, but whether AI demand and commercial adoption can continue to expand. "Our assessment is that the answer remains yes," he said. "We recommend diversifying across the AI value chain, positioning in both infrastructure beneficiaries such as semiconductors, network equipment, power, and cloud computing, as well as large platforms and software firms capable of monetizing AI." "Stricter AI safety regulations could reshape the competitive landscape, but current proposals do not signal an end to the AI capital expenditure cycle."