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Today’s Piper Sandler graph reveals the tightrope walk between US interest rates and the equity market. Despite robust inflation figures, investors have remained complacent, until now. But let’s not mistake calm for immunity. With the 10-year bond yield hitting 4.6%, signs of strain are emerging, particularly for lower quality and pricier stocks. The tipping point … Continued
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US credit spreads, as measured by the yield difference between investment-grade BAA corporate bonds and the 10-year US Treasury, currently stand at a three-decade low. Historical patterns reveal that such levels of market complacency regarding corporate default risk, coupled with an uptick in interest rates, have historically precipitated increased corporate defaults and a subsequent repricing … Continued
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The CNN Fear & Greed Index takes the temperature in terms of investor sentiment in the US stock market on a daily basis. It is composed of seven indicators including market momentum, stock price breadth, put and call options and market volatility. The index was showing greed a month ago and is now back into … Continued
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The current profit taking in tech ( Nasdaq down 6.8% over a month ) is due to a realization by investors that the Fed will not cut rates as quickly as hoped for in light of the hotter inflation data and stronger than expected economic data. Rate cut hopes for this year are down from … Continued
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The US debt is currently growing at a 10% higher rate than the US GDP. Debt increased by more than 3 trillion USD over the past 12 months alone. At the same time, interest rates have significantly increased at a time where debt needs to be refinanced and more government spending is on the horizon … Continued
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The gold price has historically been inversely correlated to real interest rates, namely inflation adjusted interest rates. The reason: in periods of ramping inflation and low interest rates, gold is a safe haven to protect against loss of purchasing power. The problem: the textbook relationship has completely broken down over the last 2 years as … Continued
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On the surface, the Chinese GDP numbers for Q1 climbed 5.3% in the period, accelerating slightly from the previous quarter and beating estimates. However the bounce came in the first two months of the year. In March, growth in retail sales slumped and industrial output decelerated. This confirms our belief that the Chinese economy is … Continued
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The attack by Iran on Israel over the weekend shows once again to what extend the Middle East is currently on fire and that geopolitical risks can no longer be ignored by investors. We read on Bloomberg this morning that “for the moment crude is little changed amid speculation that the conflict will remain contained”. … Continued
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The so-called magnificent 7 stocks ( Apple, Amazon, Google, Meta, Microsoft, NVIDIA and Tesla ) represent more than 25% of market cap of the S&P 500. Passive investors wrongly believe that by buying the index they buy a diversified basket of stocks. As we recently saw with Tesla ( stock down 30% y-t-d ) these … Continued
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The hotter-than-expected inflation data in the US sent a shockwave through the bond markets with the 10 year Treasury above 4.5% this morning, up from 3.9% at the beginning of the year. We maintain our view that central banks have arrived towards the end of their rate hiking cycle. However, as we expected, the speed … Continued