• The stock market is approaching record highs after benefiting from Donald Trump’s election victory.
• Bonds, meanwhile, have seen a sharp decline since the election.
• To spot signs of Trump fatigue, investors should watch the 10-year Treasury yield, according to JPMorgan.

Market enthusiasm surrounding Donald Trump’s victory in the presidential election actions And crypto at record highs, JPMorgan says investors looking for signs of rally fatigue should watch the Treasury bond market.

In a new study, the firm’s equity strategy team said the 5% level of the 10-year Treasury yield could be an inflection point for U.S. stocks. It is currently trading at around 4.3%.

“We believe that at around 5%, the impact of bond yields on equity valuations is starting to shift from a positive/reflationary effect to growing concerns about the sustainability of the up cycle and the growing risk of accidents,” the team, led by the firm’s head of global equity strategy, Mislav Matejka, wrote on Monday.

Government bond yields rose sharply after Trump’s victory, driven by expectations that the president-elect’s protectionist trade and immigration policies stimulate inflation and force the Federal Reserve to raise rates. The 10-year bond jumped 21 basis points to 4.47% on Wednesday, the day after the elections.

Adding to the upward pressure on bond yields is the prospect that “bond vigilantes” could express their displeasure with a growing federal deficit by selling Treasuries.

“If the Trump administration pursues an overly stimulative fiscal policy, with lots of spending and tax cuts, leading to even larger deficits, I think that could cause bond vigilantes to push yields to levels that create problems for the economy”, Ed Yardeni, the president of Yardeni Research, told DealBook in a newsletter published Saturday.

Absent a move above 5% of the 10-year Treasury, JPMorgan said the short- and medium-term direction of the market would be dictated by Trump’s policy priorities.

JPMorgan said it expects stock markets to struggle if the president-elect’s second term begins with immigration restrictions and higher tariffs. At the same time, Trump’s focus on tax cuts would have a positive outcome for stocks, the company said.