Will the US stock market reach new highs? The key lies in AI trading.

The rise in US Treasury yields often weakens the performance of the stock market. However, investors currently have more factors to consider, one of which is the so-called "artificial intelligence trading," which refers to trading that benefits from the emergence of artificial intelligence technology and the role of NVIDIA as a leader in this trend.

Artificial Intelligence Trading is Not Over

Edward Moya, Senior Market Analyst for the Americas at OANDA in New York, believes that there are still reasons to be bullish on US stocks in the coming months.

"Artificial intelligence trading may overshadow the impact of future high US bond yields and could potentially push US stocks to new all-time highs after the Federal Reserve's policy decision on September 20, as policymakers will be in a better position to indicate that they have completed the rate hikes," Moya said.

Overall, "we are still in the early stages of artificial intelligence trading, and when all the noise settles this week and trading volumes return to normal, artificial intelligence trading and NVIDIA will lead the stock market higher."

Powell's speech on Friday at Jackson Hole may unsettle investors, but unlike other observers, Moya said that weak PMI data from the US, Eurozone, and the UK on Wednesday "could change his game plan and require some dovish hints."

"It is clear that global growth prospects are not currently strong," the analyst said. "The Fed should not say that the 'mission to fight inflation is accomplished,' but rather that it is close to the target. This is the message that needs to be conveyed."

Rising US Treasury Yields Not Necessarily Impacting US Stocks

History has shown that rising yields do not always affect the performance of the stock market. Two weeks ago, Ed Clissold, Chief US Strategist at Ned Davis Research, and Thanh Nguyen, Senior Quantitative Analyst, found that "based on data from over 40 years ago, higher yields may align with the market's risk appetite—long before artificial intelligence trading became part of the equation."

Clissold and Nguyen stated that "the recent rise in the 10-year US Treasury yield has not been 'violent' enough to completely disrupt the stock market, at least by historical standards."

The 10-year US Treasury yield has risen by nearly one percentage point since April. While the speed of yield increases or decreases often affects the S&P 500 index, the volatility of US Treasury yields is not as extreme as it was in 2022, 2015, 2012, 2010, and 2008.