Raging Rates Sink Stocks Short Term

Rates are all the rage these days. The Fed, backed by their unlimited digital printing press, promised us rock bottom interest rates into 2022. The $14 Trillion US Treasury Bond market however has become the Reddit bane of the Feds existence by selling Bonds, forcing yields higher much earlier than the Fed prefers while Covid induced unemployment remains elevated (6.3%). Bond traders are certain that inflation will keep rising and possibly explode upwards when pent up consumption is unfurled on a fully open economy later this year. The stock market can continue in a Bull market higher just fine in tandem with rising interest rates. What makes investors nervous is when rates rise too quickly or too far. Most forecasters had 1.5% as the year end “high” for the 10 Year Treasury yield. When rates jumped past 1.2% two weeks ago, equity investors became nervous. When yields popped above the key 1.6% level, a brief scare infected stocks this week. If rates can consolidate under 1.5% and edge slowly higher, stocks can resume their run to record highs as they await the next stimulus passage in March. Any surge over 1.65% opens up the worry wagon for a quick trip to the 2% level in March while the economy remains partially closed.

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Disclaimer: This report may contain information on investments that are high risk and have substantial risk of principal loss. It is for informational purposes only. Statements in this communication ...

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