Core Warning on US Stock Market Topping: Slumping Asian Chip Exports May Signal an Early Capex Peak; Once Earnings Expectations Reverse, High Yields Will Crush Valuations

On October 20, Bloomberg macro strategy analyst Simon White pointed out that the key to whether the US stock market can continue to rise does not lie in the level of Treasury bond yields, but rather in Asian semiconductor supply chain data. Currently, the resilience of the US stock market is primarily supported by the extraordinary growth rate of expected earnings for the S&P 500 index over the next three years, reaching up to 40%. The impact of high discount rates has temporarily been offset by strong revenue and profit margin expectations, and the current rise in yields is driven by real interest rates reflecting real economic growth, which has not yet posed a substantive threat to the stock market.

However, this support heavily relies on the growth narrative driven by AI capital expenditure. Compared to lagging analyst forecasts and individual company announcements, chip export data from South Korea and Taiwan lead the capital expenditure cycle by three to six months. Although there are currently no signs of a reversal in these exports, a clear downturn in Asian semiconductor shipments would signal a peak in the capex cycle and trigger a pivot in earnings expectations. At that point, yields exceeding 5% would directly pose a crushing risk to the elevated valuations of the US equity market.