The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Bonds
US Treasury yields fell significantly across the curve today. US equity futures traded up nicely in the premarket. The S&P opened up small and rallied well into lunch, topping out around +55 points. The index rolled over though and was slightly negative for the afternoon. Precious metals were walloped, as was Bitcoin. Crude fell significantly on its front 5-years of the curve, with slight increases further out. When looking at sectors, energy and tech were the biggest losers while industrials and consumer discretionary were the biggest winners.
The massive drop in US Treasury yields is a double-edged sword.
It *should* help stock market valuations, especially the stocks with huge future cashflow projections. That didn’t happen today. It also could signal a compression of inflation expectations. That *might* be a bit negative to stocks but it should be excellent for the health of the US/global economy, which *should* be very good for stocks.
The flight of capital into Treasuries usually corresponds with a large scary situation. The day’s headlines don’t confirm that though. A drop in yields also can suggest anticipated economic slowdowns. Headlines don’t suggest that either.
We’ve got quite a head-scratcher in the bond market. The drop in yields was material. The reason for the drop is not obvious. If the yield drop is simply because investors find the current yields attractive, not because of a pending global risk, then today’s stock behavior is misguided.
However if the bond market is projecting *some* negative event around the corner, stocks will be walloped some more in the near future.
Personally, I think yields were too high and this is just a relative return adjustment, in size. Without some scary news, I think the US equity market settles down and reprices itself with the lower rates.
See you tomorrow.
-Mike
Visdom Market Commentary
IMPORTANT INFORMATION
This is general educational information and market commentary and is intended for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction.
All market and economic data herein is as of the date hereof and sourced from Bloomberg unless otherwise stated. The information is subject to change without notice and we have no obligation to update you.
This general market commentary is intended for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The views and opinions expressed constitute the author(s) judgment based on current market conditions, are subject to change without notice, and may differ from those expressed by other employees of Visdom Investment Group LLC ("Visdom") and Visdom. Past performance and any forward-looking statements are not guarantees of future results. It is not possible to invest directly in an index.
We believe the information contained in this material to be reliable and have sought to take reasonable care in its preparation; however, we do not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. Any securities referenced are shown for illustrative purposes only, and are not intended as a recommendation or endorsement by Visdom or by the author(s) in this context. The information presented is not intended to be making value judgments on the preferred outcome of any government decision. This information does not constitute Visdom research, nor should it be considered a recommendation of a particular investment strategy or an offer or solicitation for the purchase or sale of any financial instrument. Investing involves market risk, including the possible loss of principal. You should speak to your financial advisor before making any investment decisions. Visdom and its affiliates do not provide legal, tax or account advice so you should seek professional guidance if you have questions.
