Post by account_disabled on Feb 20, 2024 0:12:09 GMT -6
The US Treasury bond market has gotten pretty ugly this past week, with the 10-year yield rising to its highest levels since . The Federal Reserve's projections last week convinced investors that the U.S. central bank won't actually cut rates or ease policy any time soon. At the press conference, Federal Reserve Chairman Jay Powell said he would “not” consider a soft landing as his “baseline expectation” (although it is “plausible”), and that growth “may be decided by factors that "They are out of our control." Since then, 10-year Treasury yields have done this: This is a screenshot of twenty years of historical FactSet data, because some strategists have started talking in disturbingly historical terms. One of the strongest warnings comes from JPMorgan strategist and volatility whisperer Marko Kolanovic.
This one has the alarming subtitle “interest rates: history does not repeat itself, but it rhymes with 2008.” It has been quite bearish this year and will continue to be so (with its emphasis): With Job Function Email Database the recent market decline, our year-end price target of 4200 set at the end of last year was reached (the market is currently ~1% above our target). While the S&P 500 continues to rise so far this year, the gains have come entirely from a handful (7-8) of mega-cap tech stocks, inspired by the AI narrative and defying the sharp rise in interest rates. Perhaps a better indicator of macroeconomic fundamentals is the equal-weighted or small-cap S&P 500 indices, which are stable over the year and underperform cash (Fed Funds.
Why haven't we changed our defensive posture and what might come next? Despite the strong early summer rally, our framework continues to point to challenging macroeconomic fundamentals and headwinds for risk donkeyets. This reasoning is based on market valuations (fundamentals), investor positioning and various macro and geopolitical considerations. In our view, over the past six months, the headwinds to the risks in our framework are stronger and the tailwinds weaker. . . The central risk for the markets and the economy is linked to the interest rate shock of the last 18 months. Figure 4 below shows the change in federal funds interest rates, mortgage rates (30-year fixed), new auto loans, and credit cards over the past 20 years. Figure shows the current change relative to post-2008 averages (GFC), as well as the ~2 year change from post-Covid lows.
This one has the alarming subtitle “interest rates: history does not repeat itself, but it rhymes with 2008.” It has been quite bearish this year and will continue to be so (with its emphasis): With Job Function Email Database the recent market decline, our year-end price target of 4200 set at the end of last year was reached (the market is currently ~1% above our target). While the S&P 500 continues to rise so far this year, the gains have come entirely from a handful (7-8) of mega-cap tech stocks, inspired by the AI narrative and defying the sharp rise in interest rates. Perhaps a better indicator of macroeconomic fundamentals is the equal-weighted or small-cap S&P 500 indices, which are stable over the year and underperform cash (Fed Funds.
Why haven't we changed our defensive posture and what might come next? Despite the strong early summer rally, our framework continues to point to challenging macroeconomic fundamentals and headwinds for risk donkeyets. This reasoning is based on market valuations (fundamentals), investor positioning and various macro and geopolitical considerations. In our view, over the past six months, the headwinds to the risks in our framework are stronger and the tailwinds weaker. . . The central risk for the markets and the economy is linked to the interest rate shock of the last 18 months. Figure 4 below shows the change in federal funds interest rates, mortgage rates (30-year fixed), new auto loans, and credit cards over the past 20 years. Figure shows the current change relative to post-2008 averages (GFC), as well as the ~2 year change from post-Covid lows.