>cause a drop in the stock market, as more cautious investors (retirees, etc), enticed by increased yields, reduce their stock market exposure
You've committed a fallacy: the overall stock market exposure cannot be reduced because those more cautious investors, moving their dollars to treasuries, have to sell the stock to someone else.
You've committed a fallacy: the overall stock market exposure cannot be reduced because those more cautious investors, moving their dollars to treasuries, have to sell the stock to someone else.