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<\/p>\nRocky start to the new year.<\/p>\n
S&P 500 is down 0.93% year to date, down about 4.5% from its last peak in mid-December.<\/p>\n
The biggest driver is the move in bond yields, with the UST10Y rising to 4.76% as \u00a0stronger than expected jobs report tamper expectations of a FED rate cut.<\/p>\n
How should investors think about this?<\/p>\n
In my opinion, investors ought to consider 1) if the FED does not cut rates anymore, will it lead to a bear market in stocks and an economic recession? 2) will a 4.7% or even 5% bond yield lead to a recession and bear market in stocks?<\/p>\n
Bond yields are rising because the US economy is not slowing down sufficiently. Non-farm payrolls for Dec came in at 256K versus expectations of 160K and the previous reading of 212K.The unemployment rate fell, from 4.2% to 4.1%. ISM Services PMI registered 54.1 versus expectations of 53.3 and the previous 52.1. The Atlanta FED’s GDPNow for real GDP growth is 2.7%.<\/p>\n
<\/p>\n
The US economy did fine in 2023 and 2024 when the 10Y rate was ranging between 3.5% and 5%. Unless we see signs that the yield is breaking above the 5% range, it is not time to worry about the impact of higher rates on the economy.<\/p>\n
Still, investors should respect the signals generated by markets. For now, despite the weakness in market breadth and a correction in the index, the broad trend remains up so long as the 50dMA is trading above the 200dMA.<\/p>\n
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<\/p>\n
The drivers of US economic growth remains unchanged and buyers should begin to emerge as both stocks and bonds provides an attractive entry point to enter.<\/p>\n","protected":false},"excerpt":{"rendered":"
Rocky start to the new year. S&P 500 is down 0.93% year to date, down about 4.5% from its last peak in mid-December. The biggest driver is the move in bond yields, with the UST10Y rising to 4.76% as \u00a0stronger than expected jobs report tamper expectations of a FED rate cut. How should investors think […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-407","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"yoast_head":"\n