Stocks have come roaring out of the gate to start 2018 as the bull market extends to unprecedented heights. Momentum and volatility-agnostic investors have been treated to a continuation of the same strong trends that dominated last year’s markets. Yet, even with so much enthusiasm spread among the major diversified indices, there remains lackluster sentiment for many interest-rate sensitive stocks and sectors.
Interest-rate sensitivity has traditionally been the realm of fixed-income, where bond prices and bond yields are negatively correlated. Nevertheless, there are many areas of the U.S. equity markets that also key in to the fluctuations of U.S. Treasury yields. The foremost of which are utility, REIT, and financial stocks.
It feels like we have almost packed a full year’s worth of stock market price action into just the last two weeks. With so many diverging market sectors and overall fluctuations, I thought it would be prudent to do an examination of some key charts.
Taking a closer look at these categories can help frame macro views as well as determine areas of strength and weakness. Read more
The fear trade has been one of the most successful avenues for investors to take part in this year. Treasury bonds, gold, utilities, consumer staples, and REITs have all been a big contributor to outsized gains versus a traditional basket of diversified stocks and bonds. These sectors are well-known defensive plays that tend to perk up during periods of duress in stocks or as interest rates fall. They are also beloved by income investors as a meaningful pickup in yield versus a conventional Treasury bond or S&P 500 Index fund. Read more
If there is one major theme that pervades the financial markets this year, it’s the shift from stocks to bonds. You can romanticize about the momentum in gold stocks. You can peek over at emerging market strength, but nothing compares to the pervasive re-allocation of global assets. Read more
The market has drifted lower in recent weeks as rising anxiety over a second Fed rate hike looms. I look at some of the top technical and fundamental reasons the market is behaving the way it is. Observations of risk and reward are noted throughout. Charts include: large cap stocks, treasury bonds, oil, energy sector, high yield bonds, REITs, and more. Recorded on May 19, 2016.