Yields Are Surging, Markets Are Shifting — 4 Value Stocks You’ll Want to Own
The bond market just sent a major warning. Here's what it means—and 4 undervalued stocks with real upside today.
Market Update
After a nearly 20% rally in the S&P 500 since the April 8 low, investor optimism is starting to cool.
Rising bond yields and new tariff threats are partly to blame—but there are three other key factors driving the shift in market sentiment:
A credit-rating downgrade by Moody’s
A weak 20-year Treasury auction
The House’s passage of a sweeping tax bill—called the “One Big Beautiful Bill”—which extends expiring tax cuts and introduces new ones. While it passed the House, the bill now heads to the Senate for debate and likely revisions.
Meanwhile, the 30-year Treasury yield moved above 5%, the dollar slipped against major currencies, and stocks pulled back as investors refocused on the growing U.S. budget deficit and rising debt levels.
While the immediate trigger may be new, concerns around fiscal sustainability are not. The key question now: are these moves signaling a broader market shift—or just a temporary pause? And what exactly is the bond market telling us?
On a granular level, we had some very poor performers.
Biggest losers included:
NextEra Energy (NEE) down 10%
Apple (AAPL) down 8%
Elevance Health (ELV) down 8%
Airbnb (ABNB) down 8%
Medtronic (MDT) down 7%
Intel (INTC) down 7%
Advanced Micro Devices (AMD) down 6%
Prologis (PLD) down 6%
Eli Lilly (LLY) down 6%
Notable News
Trio Complete: Moody’s Joins S&P and Fitch in Downgrading U.S. Credit
Moody’s has become the last of the “Big Three” rating agencies to downgrade U.S. debt, citing years of inaction by Congress and rising interest costs as a share of GDP. This one-notch downgrade removes the U.S.'s final AAA rating—S&P downgraded in 2011, Fitch followed in 2023.
Unlike S&P’s 2011 move, which rattled markets, Moody’s downgrade was expected. The agency had placed the U.S. on negative watch last November, and bond indexes had already adjusted by using the lower ratings from S&P and Fitch. As a result, there’s no forced selling of Treasuries by passive funds.
While the downgrade doesn’t directly impact markets, it underscores the U.S.'s deteriorating fiscal health—just as Congress considers new legislation likely to expand deficits even further.
House Narrowly Passes Tax Cut Bill, Adding to Deficit Concerns
On May 22, the House narrowly passed a bill to extend the 2017 tax cuts and add new breaks for tips, overtime, seniors, and a higher SALT cap ($40K for incomes under $500K).
To help fund it, the bill proposes cuts to renewable energy incentives, tighter aid eligibility, and Medicaid work requirements. Even so, the CBO estimates it would add nearly $3 trillion to the deficit over the next decade.
Most tax cuts take effect from 2025–2028, while spending cuts are delayed—potentially pushing the deficit to 7% of GDP within two years. The final version may change, with a target date of July 4.
Why Are Bond Yields Rising? It’s Not Just the U.S. Downgrade
The 10-year Treasury yield jumped above 4.5% last week, with the 30-year hitting 5%—near levels not seen since 2007. While concerns about U.S. debt and the Moody’s downgrade are factors, they’re not the whole story.
Receding recession fears, strong equity markets, and expected fiscal stimulus have led markets to dial back Fed rate-cut expectations. Yields are rising as investors adjust to stronger growth and fewer cuts—now pricing in just two or fewer this year.
This is also a global trend. Long-term bond yields are climbing in Japan, Germany, the U.K., and Australia, pointing to broader pressure on rates—not just a U.S. credit story.
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Fear & Greed Index
4 Value Stocks
Let us dive into these 4 Stocks.
I have used the following criteria to help identify these stocks:
1. Outperformed S&P 500 last 10Y
2. ROIC 20%+
3. Net Debt to EBITDA <1.5
4. Undervaluation signal
5. Margin of Safety 20%+
Zoetis (ZTS)
Zoetis is a global animal health company that develops and manufactures medicines, vaccines, and diagnostic products for livestock and pets.
They focus on improving animal health and productivity. Zoetis serves farmers, veterinarians, and pet owners worldwide.
Outperformed S&P 500
ROIC 20%+
Net Debt to EBITDA <1.5
Undervaluation signal
Margin of Safety 20%+
Novo Nordisk (NVO)
Novo Nordisk is a global healthcare company specializing in diabetes care.
They develop and manufacture insulin and other medications for chronic diseases like obesity and hemophilia.
Their products help improve the lives of millions of patients worldwide.
Outperformed S&P 500
ROIC 20%+
Net Debt to EBITDA <1.5
Undervaluation signal
Margin of Safety 20%+
MSCI (MSCI)
MSCI provides global indices, analytics, and ESG (environmental, social, and governance) data to help investors make informed decisions.
Their products are widely used for portfolio management, risk assessment, and benchmarking. MSCI serves institutional investors around the world.
Outperformed S&P 500
ROIC 20%+
Net Debt to EBITDA <1.5 (Not quite below 1.5)
Undervaluation signal
Margin of Safety 20%+
UnitedHealth (UNH)
UnitedHealth Group (UNH) is a leading healthcare company offering insurance and health services.
It operates through two main businesses: UnitedHealthcare (insurance) and Optum (healthcare services and technology).
UNH focuses on improving health outcomes and reducing costs for individuals and organizations.
Outperformed S&P 500
ROIC 20%+ (not quite)
Net Debt to EBITDA <1.5
Undervaluation signal
Margin of Safety 20%+
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I’m not a financial advisor. All content is for educational purposes only. Invest and trade at your own risk—I'm not responsible for any financial outcomes.
If you came to these stocks why do you still give three out of four a sell advise?