At some point higher bond yields become a problem for equity multiples. In a world without QE, bond yields reflect market expectations for future inflation. The Fed can mostly anchor short-term (2-year) yields through interest rate policy, but market participants determine yields further out the
A Democrat surprise in GA this week would likely trigger a further decline in the US dollar, an increase in bond yields and some downside for the S&P 500 (SPX). We see immediate technical support for the SPX at ~3620, with stronger, secondary support in
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The positive PFE/BNTX data on 11/9 brought higher bond yields and curve steepening. The rise-over-run between the 5-year Treasury yield and 30-year Treasury yield is the key metric for relative sector performance. Spreads wider than ~130bps should benefit Industrials, Financials and Materials.
The perception around fiscal spending has already begun to shift away from ‘more is better.’ We discussed this back in early October after a sell-side equity strategist argued the potential benefits of an estimated
We’ve held a bullish equity outlook since credit spreads narrowed in late March. Our bullish outlook was based on a strong belief that unprecedented liquidity (monetary and fiscal channels) would outlive the pandemic and strong corporate balance sheets would be able to absorb a temporary
We’ve had a pro-cyclical/value bias since mid-September. At the time, financial conditions remained extremely favorable, Tech multiples had stopped expanding and bond yields were lifting off a six-month base. We gained more conviction after the 11/9 PFE/BNTX data steepened the Treasury yield curve and pushed
Most equity indices have seen decelerating price trend momentum over the past two weeks despite improved stimulus and vaccine headlines. The technical picture seems to reflect diminishing marginal upside from improved fundamentals into a period of reduced market liquidity at year-end.
Yesterday’s advance in the SPX puts the index in range of new highs this week. But a loss of momentum over the prior four sessions still has us looking for a pullback to interim technical support near ~3630 and secondary support in the ~3510-3530 range.
The S&P 500 (SPX) is short-term overbought with extreme/elevated bullish sentiment as primary near-term concerns. At the moment, there’s no evidence of sector/cross market divergences or momentum deceleration that often precedes corrective price action. Without these signals, mild downside over a longer period of time
