2% guaranteed vs maybe a down -10-15% is the question….
That’s the question investors are asking themselves as we speak, hence the disconnect in yields and stocks. Do I take the guaranteed 2% on a 10-yr gov backed instrument or risk losing 10-15% in the stock market headed into a likely dismal earning quarter?
Yields can’t catch any bid of any consequence as the rest of the world’s bond markets flirt with (or are already) yielding negative returns. I mean, 2% in the U.S. sounds pretty damn good vs. say a German 10-yr Bund yielding -0.37% or the JGBs floating at -0.15%. Money will continue to flow to the U.S. bond market for yield.
Oil is crashing – big sell following the Iran and Opec noise. By the way, if anybody wants to know why OPEC extended cuts its because they know demand is expected to decline over the next year. The initial push in crude on Sunday night was a classic bull trap – Probably sucked a lot of people in on the long side, now getting plowed -4.00% since the beginning of the week. Oil is a sell in the 4th Scenario of the model (G/I slowing)
Small Caps (Russell 2k) getting racked -2% since the trade truce gap up open Sunday night. Tapped the top of the range at 1591 yesterday, anybody sell? Some of you did – nice play.
Oh yeah, yesterday marked the longest economic expansion in world history – headed straight into slowing growth/inflation/and earnings reports
Pretty much signing off for the holiday – I’ll be in half day tomorrow and just the morning on Friday. You will hear from me if adjustments need to be made. Happy 4th of July – JC
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