Truist Advisory Chief Market Strategist Keith Lerner joined Yahoo Finance Live to break down how bond yields falling after their recent surge is impacting the market.

Video Transcript

ADAM SHAPIRO: Want to continue all of this discussion with our market guest Keith Lerner, who is Truist Advisory Chief Market Strategist. Appreciate your being here. And I need a kind of sophomoric explanation of some things that confuse a lot of us as investors, and that has to do with the 10-year yield and what we're witnessing over the past couple of days.

So in my very basic understanding, and I think this is common, when the yield is going up, the people are selling their holdings of the 10-year. But if they're selling their holdings, what are they doing with that money? They weren't going into equities. Where's that cash going?

KEITH LERNER: Well, great-- first of all, great to be back with you. We don't exactly know where the money is going. My guess would be it's probably going to somewhat of cash because, you know, equities have had a big run, and now you're seeing some money come out of the fixed income market. Normally, that data's somewhat delayed, but that's probably the most likely thing that's happening.

And you also think about some of these hedge funds, which basically, you know, they invest based on-- on interest rates and volatility. There's probably some margin calls, as well, that's happening when you see such a dramatic move so quickly and there's leverage in the system. You know, part of this is just to cover some-- some margin selling as well-- or margin calls, I should say.

SEANA SMITH: Well, Keith, the question, though, is when we see a spike like we did earlier this week, that initial spike above 1.6, that's a level we haven't seen in quite some time, I guess that really puts into question the reason why we're seeing such a big spike that we have been seeing in yields. At what point do you think, though, this places some pressure on the Fed in order to act?

KEITH LERNER: Oh, I think we're getting very close right now. I mean, it seemed like yesterday, that seemed a little climatic. We had a bad auction as far as Treasury bids. Some of the algorithms took hold. And you it saw so far today. And after that spike yesterday, we've held well below that.

But we're already seeing the ECB come in. They're already starting to talk down yields. And I suspect over the next few weeks if we see a much more higher moving rates, we're going to see the Fed president and the chairman himself probably kind of lean in against this. I don't know that we're quite there yet. But again, I think after the spike yesterday, we've seen yields come back in a little bit as well.

ADAM SHAPIRO: OK, but to follow up on all of this, so we got this potential pot of new cash waiting to be deployed. And you point out that the economy takes two steps forward, one step back. That's positive in my book. So shouldn't that money be deployed? You're still, even at 1.6% on a 10-year, you're better off in the markets and in the equity markets, aren't you?

KEITH LERNER: Well, that's our view. I mean, we've been overweight equities. We've been calling this a new bull market since last May. However, we have to remember, as you mentioned, it's really two steps forward, one step back for the stock market as well.

We-- we're up 75% since March. That's the strongest start to a bull market in history. And-- and where we are right now when we look back at the 1982 market or the 2009 market, that's where things start to get a bit choppy. And so in our view, this is very normal.

We also think we're in the next phase of the bull market after that initial snapback. That tends to be a choppier, you know, overall market. But I will say, when you look out 6 to 12 months, we're still positive. We think the primary trend is positive. And we continue to think that the earnings side is somewhat underappreciated.

But we're having a little bit of a reset and a little bit of a technical correction, and this is very similar to what we saw in 2010 coming out of that bull market as well. So I want to lose focus that the big trend is higher. But again, we often get some type of gut check in the market, and that's what we're seeing the last couple of days.

ADAM SHAPIRO: We appreciate your bringing us up to speed on all this. It's always good when you are with us, and we look forward to your next visit. Keith Lerner is Truist Advisory Chief Market Strategist. Thank you.