A pattern has emerged over the last decade in which value share performance has increased when the yield curve has steepened, a relationship that represents changes in investor behavior. This according to an article in The Wall Street Journal. The discovery has answered investor questions as to why in September, when the overall market was calm, value stocks rallied versus growth. “That correlation, nonexistent 10 years ago, has become more pronounced,” the article reports, “especially… Read More
Although rising bond market yields are causing concern, the overall market might be fine says a recent article in The Wall Street Journal that argues, “The trouble lies with the FANGs and other acronym stocks that have been leading indexes higher.” The rise in bond yields, the article says, has been “fast and painful” because, instead of being about a stronger economy and higher interest rates, it evolved “almost entirely by a higher term premium,”… Read More
At the Aspen Institute’s 25th Annual Summer Celebration Gala in August, JPMorgan Chase CEO Jamie Dimon warned that a 5 percent yield on the 10-year Treasury is in the offing. This according to an article in Bloomberg. “You’d better be prepared to deal with rates 5 percent or higher—it’s a higher probability than most people think,” Dimon said. Notwithstanding, he expressed a positive general outlook, saying the current bull market could “actually go on for… Read More
Rising Treasury yields are “prompting investors to dust off their playbooks for how to trade in an era of relatively higher rates,” according to a recent Bloomberg article. The article cites comments by Jim Paulsen, chief investment strategist at Leuthold Group, who wrote in a client note, “Historically, the stock market has done OK with rising inflation, provided economic momentum was also rising.” Paulsen added that stocks have performed well in moderate economic growth climates… Read More
A recent article in The Wall Street Journal recalls the adage that bull markets don’t die of old age. “Nine years into an extraordinary run for U.S. stocks, it’s easy to buy into the idea that the only things that can halt the market are a recession or the Federal Reserve.” But this statement, it argues, “is only half right,” adding that “with the economy now appearing to be in the last phase of the… Read More
The rise in bond yields since last month’s market correction could be good news for investors, but the challenge comes in identifying the point at which the trend could be bad for shares. This according to a recent article in The Wall Street Journal. Whereas bond investors previously thought that tax cuts would boost inflation, the article says they now seem to be anticipating a better long-term economic outlook with lower inflation expectations. However, it… Read More
The bond market continues to cause confusion for experts, writes a Charles Schwab strategist in a recent Barron’s article. Since the end of the recession in 2009, it argues, “consensus expectations have called for higher bond yields and the death of the 35-year bond bull market. Yet, 10-year Treasury yields are now nearly 200 basis points lower than in 2010.” The author opines that, although economic conditions support bond yields above 2%, market expectations are… Read More
The market would be hurt if yields on 10-year Treasuries climbed to 3 percent or higher next year, says Jeffrey Gundlach as reported in Bloomberg. The DoubleLine Capital CIO has called president-elect Trump’s policies “bond unfriendly” and says that Treasury yields above 3 percent (benchmark Treasuries are currently trading below 2.5 percent) “would start to have a real impact on market liquidity in corporate bonds and junk bonds.” Gundlach says that he will be looking… Read More
If you were to ask Jim Grant, the seasoned and sage founder of Grant’s Interest Rate Observer, where the markets are headed, you wouldn’t hear many minced words. During a recent Barron’s interview, the 70-year old Navy veteran said: “We’re on the road to an important perception that central bankers don’t have the answers and are in fact in the process of discrediting the very money they are meant to protect.” Grant, founder of the… Read More