The most important market move this week did not happen in equities. The US 10-year Treasury yield briefly reached 5.23% on Friday — its highest level since 2007 — before closing at 5.17%. That still left it 0.16 percentage points higher for the week and almost half a percentage point above where it stood a month ago.

The bond market is not inventing a problem. The Federal Reserve has just raised its policy rate to 3.75–4.00%, and officials are openly arguing that inflation pressure is broader than oil and tariffs. At the same time, the Atlanta Fed's GDPNow model is tracking third-quarter growth at a 5.0% annualised pace. Costco's adjusted comparable sales rose 6.7% in its latest quarter. Durable-goods orders excluding transport rose 0.3% in August. The economy is refusing to give the Fed an easy reason to stop tightening.

Households feel worse than the hard data look. September consumer sentiment fell to 48.1, while one-year inflation expectations jumped to 4.6%. That is an uncomfortable mix: consumers dislike the price environment, but aggregate activity is still strong enough to keep inflation risk alive.

So far, equities have chosen to look through the bond sell-off. The S&P 500 ended Friday at 7,743, less than 1% below its August closing record. AI enthusiasm is doing much of the heavy lifting. But the credit market is already becoming more discriminating: AI-linked corporate bonds now offer investors more extra yield than the broader high-quality corporate bond market, while borrowing by the biggest cloud companies is projected to surge again next year.

This is not a call for an imminent equity sell-off. It is a warning that the required return has changed. At 5% Treasury yields, future cash flows are worth less, leverage costs more and ambitious capital spending needs to earn its keep faster. Growth can keep stocks rising. But from here, growth has to outrun the price of money.