Treasury yields are surging… the U.S., 10-year treasury – a rate which every financial asset is tied to – has ripped back above 4.60%. Credit card rates, home loans, auto loans… you name it… have all increased. The last time UY.S. 10-year yields traded above 4.60% – the S&P 500 was ~20% lower. From mine, the divergence is a head-scratcher… however, what I can say is risk assets have a tougher time advancing when yields push beyond this zone. The question is – is now a good time to increase bond exposure? I think the answer is yes.. and here’s why
Interest Rates / Bonds
Actionable market insights delivered to your inbox weekly
Rate Cuts and Small Business Optimism Fades
Make that three in a row. Jan, Feb and Mar CPI all exceeded expectations – showing how stubborn inflation can be. And whilst the Fed focuses more on Core PCE (due at the end of the month) – this remains a concern. Here’s the thing: non-core inflation continues to hurt real America. Take small business – their confidence is now at 2012 lows. Their primary concern: inflation and higher input costs.
How About Zero Rate Cuts this Year?
At the time of writing (April 7) – the market is pricing in three rate cuts this year. I don’t see it. In fact, I think there is a very good chance of NO rate cuts this year. Now that is not a scenario the market is pricing in. However, with inflation likely to remain stubbornly high – where property prices are not falling – and the labor market remains tight – why would the Fed cut? Let’s explore….