Bond yields have risen sharply in the first few sessions of June, in a move that stocks have largely shrugged off. But if rates keep rising, two sectors could run into particular trouble.
The first is that classic rate-sensitive sector, the utilities, which are famous for their high dividend yields.
Utilities are "viewed as bond substitutes, and I think that could be a danger here," Boris Schlossberg, a macro trader with BK Asset Management, said in a Tuesday "Trading Nation " interview. "They could be very vulnerable going forward."
However, it's not just the utilities that may be in trouble. Erin Gibbs, equity chief investment officer at S&P Capital IQ, said higher rates could mean more volatility for housing-exposed stocks. When rates rise quickly, consumers tend to get less excited about buying houses, since financing become less attractive.
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"I think if we keep seeing a sharp uptick, they could see some downward momentum, even though, actually, home sales haven't been that bad," Gibbs said in the same "Trading Nation" interview.
True to Schlossberg's and Gibbs' points, the S&P 500 has been essentially unchanged in June, but the utilities industry group has fallen more than 4 percent, and real estate stocks are down 2 percent.