"Interest Rates Are Going Thru The Ceiling" – The Next “Big Thing” To Worry About

  • Humankind is a species that feeds on negative news aided by the media that knows how to feed that need
  • The market appears willing to ignore really bad news on the virus front … an obsession on the way out
  • The next big thing may be rising interest rates which will go hand in hand with improving stock prices
  • Good vaccine news this past week set off a big rally in risk assets (notable was a new all-time-high in the small cap Russell 2000) and a significant sell off in flight-to-safety assets, namely the 10-year US Treasury.
  • Rates should go up in an improved economic environment
  • Despite what you read, see or hear, it will not be the end of the world

 

The need to obsess
For some reason the market and its participants cannot be happy even when “everything’s coming up roses and daffodils.” This is especially true when it involves the media and punditry corps who make their living by keeping you fearful and engaged. For as long as I’ve been watching (a few more decades than I care to mention) the aphorism ‘bad news sells’ seems to never fail as a predictor of human nature. Contrary to all the evidence of the stock market being a great wealth-generating engine in the long run, most investors constantly find themselves constantly obsessing about the minutia of the short term.
 

Shifting Obsessions
It looks to me like the market’s obsession with Covid19, however strong the current surge in the virus has been, is becoming old news. We have moved to new index all-time-highs as we’ve gotten to know the beast. It is formidable but there appears to be a light at the end of the tunnel, a vaccine that may be able to put a parenthesis around the outbreak. Not only is there a current, apparently efficacious vaccine but there are many other candidates and therapeutics in the works. Also, if we’d all use common sense, mask up, social distance and avoid close contact situations we could make a substantial reduction in new cases on our own.So, what is the new bull market killer … the obsession waiting on deck?

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Disclaimer: The information presented here represents my own opinions and does not contain recommendations for any particular investment or securities. I may, from time to time, mention certain ...

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