Stock an unlikely hedge against turmoils in debt, dollar, emerging markets

The pain from increasing dollar strength and higher US yields could spread through corporate America. Emerging market turmoil could deepen

U.S. bond yields are the highest in seven years, the dollar is strengthening, emerging markets are wobbling, and oil is up to $80 a barrel. Yet there is an unlikely oasis of calm out there: stocks.

There are many possible reasons for this, including: US tax cuts boosting earnings expectations and share buybacks, exchange rate moves, a sense a 3 per cent Treasury yield was already priced in, and a belief that the turmoil in the emerging world is and will remain isolated to certain countries.

Since the 10-year US yield and dollar really began to take off in mid-April,