Stock Valuations Defy Rising Rates as Earnings Growth Offsets Impact, DataTrek Finds

Rising long-term interest rates have not suppressed U.S. equity valuations, and earnings growth expectations explain why, according to analysis from DataTrek Research. Co-founder Nick Colas challenged the common assumption that higher rates mechanically reduce the present value of future cash flows and thus stock prices. From 2015 to 2019, the 10-year Treasury yield averaged 2.27% while the S&P 500's forward price-to-earnings ratio ranged between 15 and 18 times. As of Wednesday, May 27, 2026, the 10-year yield stood at 4.49%, yet the forward P/E had climbed to 21 times earnings. Colas attributed this disconnect to discounted cash flow math: a 2-percentage-point rise in rates can be more than offset if earnings growth expectations increase by 3%. The finding highlights a common mistake in market analysis—isolating one variable while assuming others remain constant. In practice, corporate earnings have trended higher over time, providing a buffer against rate headwinds.