Why Hightower's Top Investment Strategist Is Sticking With Stocks Even As High Treasury Yields Beckon

• Stephanie Link is a "glass half full" investor, and she sees more good times ahead.
• Consumer spending has been the backbone of a bruised but still-growing economy.
• She gave some ideas on how to invest in optimism, and when investors might run to bonds.

As the 10-year Treasury yields inch toward a 6% coupon, it begins to raise the question of when investors may consider switching their equity allocations to fixed income.

After a long period of dominance by stocks, some investors may look at that 6% yield as a sign that it's time to switch things up and invest more heavily in fixed-income, said Stephanie Link, chief investment strategist for $350 billion wealth manager Hightower. A record $166 billion was poured into money market funds last week, showing that investors are already taking advantage of rising bond yields and lower prices. As of Thursday morning, yields started fallin

"There used to be no alternative to stocks," Link told Business Insider. "Now you have a little bit of competition, which is healthy and positive from a diversification point of view."

But Link, a "glass half full" type of investor, still thinks equities have room to run and is where investors will win long-term.

A guaranteed 6% or more coupon is still much lower than the S&P 500's inflation-adjusted 7.7% annual average and won't keep pace if inflation continues to rise.

It's been a chaotic year for the markets, but the bottom has still not fallen out.

"You go back in January, we had Venezuela, we had SCOTUS overturning tariffs, we had private credit concerns, AI apocalypse, and yet the market continues to kind of grind higher," Link said.

Those returns were "not as easy" as they'd been over the previous three years, but when the Atlanta Fed Tracker still projects growth above expectations, she sees optimism continuing to pay off.

"No one would have ever thought that in the face of all the gloom and doom," Link said. "Negativity sells. Positivity is boring."

US consumers are still spending

The main thing buoying her positivity is strong consumer spending. People still have jobs, with initial non-farm jobless claims last week at their lowest since 1969. Spending continues apace, and while a divide remains between high earners and everyone else, Link sees signs that the K-shaped economy may be narrowing, with wage growth recently stronger among lower earners.

"It's always been a bad, bad move to bet against the US consumer because we are a nation of spenders," Link said.

Many consumers are spending because they're beneficiaries of the massive increase in wealth from equities and home prices, Link said.

But Link said this "doesn't mean everything is perfect."

The real question is when rates will start to take away from consumer spending, she said.

Inflation has also risen alongside the Iran War and ever-higher budget deficits, but one long-term culprit is AI.

" We are short everything in this country, compute, memory, copper," a dynamic that will leave prices high for a while, Link said. Eventually, AI productivity will drive prices down, she said, and we're in the early days of seeing that pay off. For now, it's her view that economic growth, largely driven by AI, is raising bond yields.

"The biggest reason as to why the bond market has done what it's done is because the growth is better than expected in the economy," she said.

How to buy optimism

She does think, however, that it's likely that market breadth will improve over the next quarter following earnings, as more industries that have been boxed out by AI, like finance and industrials, should be able to capture a bit more of the economic piece of the pie.

Even the AI food chain, including companies that manufacture equipment, or components of equipment that go inside data centers, like Vertiv, Dover, and Timkin, or electrical infrastructure and equipment specialists like Eaton or Quanta Services, are down from their highs, and could see an uptick after earnings.

She sees promise in quantum computing, robotics, and the cybersecurity sectors, and thinks a small sliver of SpaceX could be a great long-term, but "speculative" investment. She pointed to the well-over-25,000 % return a Tesla investor would have made if they had put their money in the stock back in 2010, and thinks Elon Musk could repeat it.

They're already a "behemoth" in space, and are renting out compute, but Starlink is the main reason why she likes the stock, given how helpful it is for travelers like her compared to plane wifi.

"This is the whole Peter Lynch way of investing," Link said, referring to the famous Fidelity fund manager. "Invest in what you know and what you see."