Apparently, yields are not done rising. Yesterday, amid concerns that the Fed would let inflation accelerate, the 10-year treasury yield reached 1.75%. Historically, this is nothing, but in the current climate, it feels like a punch to the gut.
I was tempted to copy-paste yesterday’s briefing for today. The 10-year yield hasn’t budged. The S&P and the Nasdaq inched up. The Dow continued to rise. Not much as changed. With very reassuring communication from the Fed, people’s expectations are that rates will remain low.
Many countries are aggressively rolling-out vaccines to bolster economic recovery and it seems to be working. At least investors are optimistic and most risk assets are doing well. Yesterday, though, after several winning sessions, the buying paused.
We’re not done going up. Typically, you’d expect some pause or even a quick pullback, but risk assets haven’t stopped going up since the relief package advance and the last Fed’s speech. The S&P is at an all-time high, at 3,970. The Dow is at an all-time high as well, at 32,950. The Nasdaq walked back on half of its losses from the past few weeks.
In the past few weeks, while traditional markets suffered some downside volatility, BTC fell, but managed to maintain a certain strength.
With yields retreating slightly, the dollar retracing down, and decreasing concerns over inflation, equities rose across the board yesterday. The S&P jumped more than 1%, the Nasdaq more than 2.5%, and the Dow continued its price exploration above 32,000.
The 10-year yield paused for a bit, following a large 10-year note auction and the mixed outlook of economic recovery balanced by still accommodating Fed policies and the 1.9 trillion relief package. The cycling of money from tech/growth stocks to value stocks endures. The Dow rose to record highs during the last session, above 32,000 for the first time ever. In comparison, the S&P rose just half a percent and the Nasdaq closed flat.
Buyers and holders of risk assets will be happy today. With a Fed meeting coming next week and investors expecting accommodating policies, the 10-year yield retraced slightly, now back at 1.53%. Equities had a field day with the S&P and the Nasdaq, up 1.35% and almost 4%, respectively. Gold also enjoyed a reversal, rising almost 2% on the session.
It’s fascinating to see investors cycling from tech stocks to more traditional/real economy types of stocks. With the 10-year yield persistently around 1.6%, investors are now reviewing their portfolios and questioning valuations. The Dow index is rising, but the Nasdaq continues to fall, down 2% yesterday.
The reason I start this morning briefing with a recap of traditional markets is because it typically sets the macro environment for investors globally.
It’s been a while since we’ve seen interesting moves in traditional assets—relative to crypto. Yesterday, while the 10-year yield marched on to above 1.55%, equities retraced on pretty much all of their gains since the beginning of this year.
If you’ve been reading this briefing for a while, you’re aware of the link between bonds and equities. Yesterday, again, bonds were sold en-masse, pushing the 10-year yield close to 1.5%. Investors feel like they are due for a reopening of the economy and are cycling away from tech/growth stocks and onto more ‘real economy’ type of names.