Category: Daily Instagraph

As we are entering the Q3 result season, it is important to remember that the yield on US 6 month Treasuries is now more than 1% higher than the earnings yield of the S&P 500. Literally investors are currently paying up to take equity risk, which appears counterintuitive to say the least. This has not … Continued

As we explained in yesterday’s daily, performance of the traditional 60/40 portfolios has been suffering since central banks started to hike rates. The main reason is the positive correlation between stocks and bonds. As illustrated in the below graph from Crescat Capital, this is a new regime after 2 decades of negative correlation and a … Continued

The classical US 60/40 portfolio composed of 60% of equities and 40% government bonds had another 7% loss over the last 3 months. From a historical perspective, these successive important drawdowns seen over the last 1 ½ years are truly remarkable. It looks like combining bonds and equities in portfolios to make them more defensive … Continued

With the 10 year US and German government bond yields at a juicy 4.6% and 2.8% respectively, investors are increasing the allocation to bonds. This makes sense as the interest-rate hikes by central banks may be close to done and peak rates reached. 2 caveats: First, as the y-t-d negative performance of bonds has again … Continued

US banks are currently sitting on more than 400 bn USD of unrealized losses in their bond portfolios. The  amount of losses is at an all-time high and 10% higher than at the beginning of the year, just before the collapse of Silicon Valley Bank. We believe this duration mismatch between long term assets and … Continued

Hamas surprise attack on Israel is triggering fears of an oil supply chock. The Wall Street Journal reported Iranian security officials helped Hamas plan on its attack on Israel. If this proves correct, the risk of further destabilization in the region is high especially in case of a retaliation by Israel considering Iran is a … Continued

The US consumer is feeling the heat from the higher interest rates: delinquencies in consumer loans and bankruptcies are noticeably on the rise. The pain in mortgages is somewhat delayed as many mortgages are locked in at low rates. While the US consumer remains in pretty healthy shape, he will need to adapt to the … Continued

Berkshire Hathaway, the holding company of Warren Buffett, has accumulated a record war chest approaching 150 bn USD of cash & equivalents. This cash pile can be put to work when investment opportunities arise in case of a market disruption. Buffett has shown in the past that buying good assets at distressed prices when other … Continued

Today’s graph is for the investors who still believe you cannot lose money with US government bonds. Yes, you obviously can if you own long dated maturities and rates are rising. The I-shares 20+ Year Treasury Bond ETF is down 48% since its high in 2020 and the PIMCO 25+ Year Zero Coupon US Treasuries … Continued

With one quarter to go in 2023 for portfolio managers to generate performance, it needs to be stressed again how binary US equity markets have been for investors this year. Success or failure boiled down to one decision, namely being invested in the so-called magnificent 7 stocks ( Alphabet, Amazon, Apple, Meta, Microsoft, NVIDA and … Continued