October 3, 2026

The safe interest rate rose, and every expected return rose with it

The 10-year US Treasury yield, the return you can get with almost no risk, rose from 4.76% to 5.24% in a month. Every investment has to beat it, so expected returns rose by the same 0.48 points: the S&P 500 from 8.52% to 9.00%.

What changed

Symbol	Before	After	Change
The S&P 500SPY	8.52%	9.00%	+0.48pp
The Nasdaq 100QQQ	9.78%	10.26%	+0.48pp
AppleAAPL	5.77%	6.25%	+0.48pp
NvidiaNVDA	18.93%	19.41%	+0.48pp
Samsung Electronics005930	12.67%	13.15%	+0.48pp
TLT	6.03%	6.51%	+0.48pp
GLD	5.22%	5.70%	+0.48pp
iShares 1-3 Year Treasury Bond ETFSHY	4.72%	5.20%	+0.48pp

This change moved 639 symbols; the table shows a few. Figures are annual expected returns (arithmetic means), after fees for funds. They are not a forecast or a promise.

The safe rate went up

When you lend money to the US government for ten years, by buying a 10-year Treasury bond, you earn a yield with almost no risk of not being paid back. On October 1 that yield closed at 5.24%. In early September it was 4.76%, so it rose by nearly half a point in a month, to its highest level since 2002.

The rise did not come from fears of higher prices. The inflation investors expect stayed at about 2.4% a year. What rose was the yield after inflation, to 2.88%: investors now ask to be paid more for tying up their money for a long time.

Why every investment starts from it

Every investment competes with that safe yield. If the government pays 5.24% with almost no risk, nobody would hold a riskier investment, a stock or a corporate bond, unless they expected more than 5.24% from it. So any expected return can be read as two parts: the safe yield, plus an extra reward for taking risk.

The ten-year yield is the one to use because most of these investments are held for years, so they compete with a safe investment of similar length.

So expected returns rose by the same amount

The safe yield rose by 0.48 points, and nothing suggested that investors now want a bigger or smaller reward for risk. So the first part rose and the second stayed the same: expected returns on stocks, bonds and commodities all rose by the same 0.48 points. The S&P 500's expected return went from 8.52% to 9.00%, and the Nasdaq 100's from 9.78% to 10.26%. 639 of the 642 investments here moved this way. Only three funds whose returns are set in a different way, such as the volatility fund VXX, did not.

The chart lays a year of simulated outcomes for the S&P 500 over the same simulation before the change. The two ranges almost cover each other: half a point is small next to how far stocks can move in a year, so the middle shifts a little and the range stays the same.

SPY (after), one year simulated

Last close$779.33

Actual price90% of runs50% of runs50th percentile run

Run drawn

History

Return a year out

The chance of a loss over the year is 27%.

Point at the curve for the odds at any return.

Mean +9.0% ($849)Below today 26%Above today 74%

Where the 2,000 simulated years finished, as percent from the price today.

How this is made

Where the centre comes from

The middle of the band is our expected return for this asset over the next year. We start from what investors as a whole can expect to earn and share it out across asset classes, sectors and companies, in proportion to how much risk each carries and how they move together. Where we have specific information — analysts raising or cutting their earnings forecasts, for example — we move a company’s expected return up or down, and say why beneath the chart. The middle line is the typical outcome rather than the average, so the more volatile the asset, the further below its expected return it can sit.

How the paths are drawn

Each path is one possible year, drawn many times over. It starts at today’s price and drifts toward the expected return above, while its day-to-day swings are as large as this asset’s own swings over the past few years — its historical volatility. Repeating that thousands of times gives thousands of different years. The band is the range most of them passed through, and the bell curve is how they were spread out at year end.

SPY, one year simulated

Simulating SPY…

Which investments look better did not change

Because everything moved by the same amount, no investment looks better or worse against another than it did before. What moved is the starting line. When a safe bond pays more, a riskier investment has to earn more than that to be worth holding.