"If you know what the 10-year Treasury is doing, you can predict all other markets," says Brian Nick, chief investment strategist at Nuveen. Ten-year Treasury yields are key for currency rates and in the stock market, the driving force behind which sectors will outperform and which won't, according to Nick.

In the first quarter of this year, when 10-year Treasury yields were rising, financials and energy stocks outperformed, reflecting higher inflation and inflation expectations as the economy accelerated. "It was off to the races," says Nick.

By the second quarter, 10-year Treasury yields were falling, as concerns about a slowing economy and resurgence in Covid-19 infections due to the more contagious Delta variant grew. The so-called reflation trade retreated and tech stocks, real estate investment trusts (REITs), and healthcare securities outperformed.

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Bernice Napach

Bernice Napach is a senior writer at ThinkAdvisor covering financial markets and asset managers, robo-advisors, college planning and retirement issues. She has worked at Yahoo Finance, Bloomberg TV, CNBC, Reuters, Investor's Business Daily and The Bond Buyer and has written articles for The New York Times, TheStreet.com, The Star-Ledger, The Record, Variety and Worth magazine. Bernice has a Bachelor of Science in Social Welfare from SUNY at Stony Brook.

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