Bond Yields and Stock Performance: Why GE Vernova is the Smart Play in Rising Rates

In a market defined by surging bond yields and fiscal uncertainty, investors are faced with a critical question: Which sectors can thrive amid rising rates? The answer lies in companies positioned to capitalize on structural tailwinds—like energy transition and infrastructure spending—while avoiding the pitfalls of rate-sensitive industries. GE Vernova emerges as a prime example of resilience, contrasting sharply with sectors such as retail, where companies like Home Depot struggle under the weight of higher borrowing costs. Let’s dissect the dynamics at play and why now is the time to act.

The Bond-Yield Conundrum: A Double-Edged Sword

The 10-year U.S. Treasury yield has surged to 4.37% as of May 2025, driven by inflation fears, geopolitical tensions, and fiscal policy uncertainty. This rise creates a dual impact on equities:
1. Rate-sensitive sectors (e.g., consumer discretionary, tech) face headwinds as higher borrowing costs dampen demand and compress profit margins.
2. Resilient sectors, however, benefit from demand anchored to long-term trends—like energy transition and government-backed infrastructure projects.

The correlation between bond yields and stocks has flipped positive, meaning both now move in tandem due to shared macro risks. Yet this isn’t a uniform story—some stocks are defying the trend.

GE Vernova: Riding the Renewable Energy Wave

GE Vernova, the renewable energy arm of General Electric, exemplifies a company thriving in this environment. Its focus on wind, solar, and grid infrastructure aligns perfectly with global decarbonization goals and U.S. infrastructure spending. Key strengths include:
- Government Contracts: Secured $2.8 billion in 2024 from the Inflation Reduction Act’s clean energy subsidies.
- Infrastructure Momentum: A $1.2 trillion U.S. infrastructure bill fuels demand for grid modernization and transmission projects.
- High-Visibility Revenue: Long-term power purchase agreements (PPAs) provide stability amid rate volatility.

GE’s stock has outperformed the broader market by 15% in the past year, even as bond yields rose. This resilience is no accident—it’s a product of structural demand that’s immune to short-term rate fluctuations.

The Contrast: Retail’s Rate Sensitivity

On the flip side, sectors like retail are vulnerable to rising rates. Take Home Depot, where higher mortgage rates have slowed housing demand, denting sales of home improvement products. The company’s Q1 2025 revenue fell 3% year-over-year, with management citing “elevated inflation and borrowing costs” as headwinds.

The correlation here is stark: Every 25-basis-point rise in bond yields has historically reduced Home Depot’s sales by ~1%, as consumers delay discretionary spending. With yields now above 4%, the pain is compounding.

Cramer’s Take: Bonds Dominate, but Equity Winners Exist

Jim Cramer recently highlighted that “bond markets are the new kingmakers,” as fiscal uncertainty and recession risks drive investors to safety. Yet he also warned against blanket market pessimism: “You need to pick stocks that thrive in this environment—like those with government-backed projects or inflation-linked revenue streams.”

GE Vernova fits both criteria. Its work on grid resilience and renewable energy is directly tied to federal spending priorities, offering a shield against economic slowdowns.

The Investment Thesis: Buy GE Vernova Now

The case for GE Vernova is threefold:
1. Structural Tailwinds: The global shift to renewables and grid modernization is a decades-long process, insulated from cyclical rate cycles.
2. Fiscal Support: U.S. policies like the Inflation Reduction Act and infrastructure bill are funding projects GE is already contracted to deliver.
3. Valuation: At 12x forward earnings, GE trades at a discount to its historical average, despite its growth profile.

Meanwhile, rate-sensitive sectors like retail face an uphill battle. Home Depot’s valuation (15x forward earnings) offers little margin of safety if yields stay elevated.

Final Call: Act Before the Rally

The bond yield surge isn’t a death knell for equities—it’s a filter. Investors should focus on companies benefiting from secular trends, not transient macro conditions. GE Vernova is positioned to lead this rotation.

With fiscal uncertainty likely to persist, now is the time to buy GE Vernova. This isn’t just a stock—it’s a bet on the future of energy and infrastructure, two sectors that will thrive even as yields climb.

The market rewards foresight. Position yourself accordingly.