If you’re curious, stocks reacted just as they “should’ve” to the selloff at the long-end of the Treasury curve, and any extension (or I suppose “resumption” is the better word, given bonds rallied sharply this last week) of that selloff probably won’t derail equities too badly.

That’s according to Goldman’s David Kostin, who recycled some familiar analysis to assess recent price action across stocks and bonds.

I’ve been over these numbers I don’t know how many times, but given the extent to which the trade in equities since late November was (and still is) largely a function of rates and bonds, it’s worth briefly revisiting the math.

On a two-decade lookback, the S&P falls by 4% on average when yields rise by two standard deviations or more over a 30-day period. In other words, it’s the rapidity of rate rise that matters, not necessarily the absolute level of yields.

The figure, above, will be familiar to anyone who’s perused Goldman’s equities research over the years. They roll it out whenever rates rise sharply and flip the correlation with stocks such that the two assets selloff (and rally) in tandem.

“The recent S&P 500 decline mirrored almost exactly the typical experience in past episodes of sharply rising interest rates,” Kostin wrote, noting that a two standard deviation monthly move today is equal to around 60bps, “similar to the magnitude of the increase in rates since early December.”

Why shouldn’t investors be concerned? Or more concerned, perhaps I should say. Well, for one thing, the most recent CPI and PPI data suggested the local highs for yields are probably in, but that aside, Kostin was quick to remind market participants that nearly all of the debt on corporate America’s balance sheet (and here I mean big corporate America) is fixed-rate, and blue-chip US corporates took advantage of ultra-low rates in 2021 to term out and lock in.

“Of the $6.2 trillion of debt currently carried by S&P 500 non-Financials companies, 94% is fixed rate, and 51% matures after 2030,” Kostin noted. That, he went on, “explains why S&P 500 borrow costs have increased by less than 100bps since their record low in 2022 despite the fact that nominal 10-year Treasury yields have risen by more than 200bps during that same period.”

Do note: That picture looks quite a bit different for smaller companies, and particularly for “mom and pop” businesses which, without access to capital markets, have to rely on loans and other variable-rate funding. But America’s corporate “haves” are insulated from rising rates, and it’s entirely possible that by the time their debt needs to be rolled and refied, rates will be meaningfully lower than they are today (albeit almost surely higher than where they were in 2020 and 2021).

The analogue on the household side of the economy is the juxtaposition between the well-to-do — whose fixed-rate mortgages were unaffected by rising rates, and whose cash savings began to generate a lot of monthly income as the Fed hiked — and the not-so-well-off, who generally don’t own their home, who rely on credit cards to make ends meet and have very little in the way of interest-bearing savings.

I like the figure above. I use it all the time. It illustrates, better than perhaps any other, how the US economy managed to shrug off the most aggressive rate-hiking campaign in a generation.

All of that said, higher yields could eventually weigh on corporate bottom lines. “For higher yields to have a substantial impact on the earnings outlook, they would have to constrain economic growth through tighter financial conditions,” Kostin said, noting that all else equal, a 100bps increase in yields would drag US GDP growth by 50bps over the ensuing year, which in turn would lower the bank’s out-year EPS estimate by “about 2%.”

Of course, all else is never equal, particularly not in the 2020s. As Kostin put it, “the last few years have demonstrated how much uncertainty surrounds estimates of the relationship between interest rates and the economic growth outlook.”