Small yields, high prices, and too much supply spell trouble, hedge fund chief warns.
Ray Dalio
To Ray Dalio, buying bonds is “stupid.” The bond market worldwide is in a “bubble,” he declares. And fixed income pays too little to bother with, in his view.
A world awash in debt is headed for big problems, the head of hedge fund powerhouse Bridgewater Associates wrote in a LinkedIn essay. “As the amounts outstanding grow, the risks also grow,” he contended.
And given Washington’s big countercyclical spending, with President Joe Biden’s $1.9 trillion aid package the latest addition, the vast ocean of global debt will only get larger and more unmanageable, Dalio said. This is a stance that is taking hold in some corners of the financial realm.
Ned Davis: Tech Titans Could Fall 20% This Year
If Treasury yields keep rising, and the 10-year Treasury hits 2%, it’s bad news for the Nasdaq 100, the research firm warns.
How the mighty hath fallen. Tech stocks, which led the market ever higher last year, have surrendered their winning ways this winter. And bond yields are rising, never a good thing for tech names.
In fact, if the benchmark 10-year Treasury note climbs to 2% later this year, then the go-go-iest index of them all, the Nasdaq 100, could lose 20% in value, according to Ned Davis Research. The index which includes the likes of Facebook, Amazon, and Apple already is down almost 6% from its February peak.
Will Pent-Up Consumer Demand Really Supercharge the Economy? Uh-uh, Economist Warns
Stephen Roach: A lot of consumer spending already has occurred and the federal aid package will be just a temporary boost.
Listening to perma-bears is never a pleasant experience. Especially when the stock market is once more heading aloft on the wings of optimism about a vibrant post-virus economy. But economist Stephen Roach always is worth listening to.
Roach warns that investors are foolish to believe the starry expectations that pent-up consumer demand, when finally able to express itself as folks emerge from their homebound exiles, will power a further boost.
The dollar edged lower on Wednesday following a tame U.S. inflation report and a tepid auction of benchmark 10-year Treasury notes, while riskier currencies like the Australian and New Zealand dollars rose on improving global growth prospects. U.S. consumer prices posted their biggest annual gain in a year, though underlying inflation remained tepid amid sluggish demand for services like airline travel, the data showed. U.S. Treasury yields slid following the data, as market participants had hoped for a more upbeat outlook on consumer prices.
Last weeks sharp move in the 10-year yield unsettled the stock market.
However, Gargi Chaudhuri doesn t expect nominal interest rates to return to pre-pandemic levels.
She explains why, and shares three areas of the market that have already gained traction.
Last week, the stock market came under pressure as rising bond yields sparked a volatile end to February.
However, US stocks came out strong on Monday, with all three major indexes bouncing back from last week s losses. On Monday morning, the Dow kicked off with a 2% spike, while the S&P 500 climbed around 1.9%. The Nasdaq enjoyed a 3% gain in response to the fall in bond yields and the passing of Biden s $1.9 trillion spending package.