In the interest of the upcoming Easter and current Passover holidays today’s edition will be quick. Similar to the 1st Quarter of 2021 which seemed to FLY BY!
Market – and my clients’ portfolio – performance was strong to start the year. There is caution in the air, however, as 10-year US Treasury yields climbed to levels not seen since early 2020 before the pandemic began. The swiftness of the rise in bond yields warrants caution in the overall stock and bond markets.
Stocks are now officially virtually “the only game in town.” As of Thursday’s announcement by the US Federal Reserve, their benchmark interest rate will remain at near-zero for the foreseeable future. The “foreseeable future” has been indicated as at least 2022 and perhaps beyond. The “benchmark interest rate” set by the Fed dictates interest rates on most money markets, bonds, and CDs – and most mortgages. This discussion is focused on bonds, CDs, and money markets versus stocks.
Calling it a “New World” is a bit of an exaggeration but since this week the yield on the 10-year US government bond topped 3% for the first time in four years, it was kind of a big deal in the investing world.
The 10-year US government bond is a benchmark and indicator for a number of things including: mortgages, companies borrowing to grow, the price of oil … and, yes, stock prices. We all know that the “financial crisis” is now 10 years in the past and for the past 10 years interest rates have been super LOW. This has been both positive and negative for investors. Continue reading “New World… Of Higher Bond Yields”