Morning Notes — Bond Yields and Sector Outlook
We expect nominal bond yields to continue moving higher from here as long-end yields currently imply near zero GDP growth in 2022.
We expect nominal bond yields to continue moving higher from here as long-end yields currently imply near zero GDP growth in 2022.
Key support of the 5/30 yield curve sits in the 75-79bps range. We expect the 5/30 curve to hold above those levels given the fundamental outlook and recent yield deceleration at the front end of the curve.
Key support of the 5/30 yield curve sits in the 75-79bps range. We expect the 5/30 curve to hold above those levels given the fundamental outlook and recent yield deceleration at the front end of the curve.
Expect the S&P 500 (SPX) rally to decelerate in the days ahead as the index faces internal technical resistance at ~4620.
Headlines out of Washington over the past ~12 hours suggest the risk of tax hikes can nearly be eliminated from the list of concerns facing equity investors.
Yesterday, the S&P 500 closed beyond pre-identified resistance in the 4460-4590 range with broad sector participation. The price action adds conviction to our positive Q4 outlook for the index.
Two weeks ago, the S&P 500 (SPX) reversed from short-term oversold levels and above predefined support in the 4230-4250 range. Those dynamics gave us confidence in our bullish Q4 outlook.
Inflation-related data early last week pointed to further pricing pressures with: 1) big increase in inflation expectations within the New York Fed survey; 2) upside September CPI print and; 3) the Social Security cost-of-living adjustment.
Covid-related drags should continue to fade in the weeks ahead, which will likely drive yields gently higher with curve steepening. Equity markets should begin to embrace a more durable cyclical recovery, which will benefit the most cyclically-sensitive groups like Financials, Materials and Energy.
The Covid situation should continue to improve and extend the cyclical recovery. Btw, Friday’s interim study results on MRK’s oral anti-viral treatment (5-day regimen) looks like a significant step in reducing the impact of Covid.