Morning Notes — Real Yields and the Pain Trade

SPX: 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.

NDX: We remain cautiously optimistic on the NASDAQ 100 in the near term, but would drop the optimism if 10-year real yields advance to much further.  Historically, Tech multiples and real yields have had a very strong negative correlation. Today’s underperformance in growth/Tech occurs as 10-year real yields test the 200-day moving average at -0.89.  Levels beyond -0.89 would create a more significant headwind for the NDX and levels beyond -0.81 would likely lead to outright multiple compression.