Friday, September 23, 2022
It’s an unfortunate development, especially for those of us looking to pull from our 401k portfolio upon retirement in the near term: the stock market is going to open at its lowest levels of the year. It’s of scant delight someone in this position would heed the advice, “So now’s the time to put more money to work in the market.”
But to stay invested, or at least take some of that sideline cash you’ve (hopefully) amassed and buy high-quality equities as their valuations are reduced to multi-multi-year lows, is indeed the remedy here. If you can afford to have patience in this market, that’s what will pay off.
With the 10-year Treasury bill yield climbing up over 3.8% this morning (it has since abated somewhat) and the 2-year sprinting past 4.2% — its highest level in 15 years — we’re starting to see bonds become more attractive, which is naturally drawing some investment out of equities currently. I mean, a 4%+ yield on a 2-year bond does look a lot better than a negative return on a “growth” equity that may not show earnings for at least two years. In other words, TINA (“There Is No Alternative” to stocks) has left the building, at least temporarily.
We wake up learning about new economic policy coming out of the UK: an issuing of the biggest tax cuts in 50 years. This looks to have created a destabilization on the global markets this morning, with the British pound plunging versus the U.S. dollar to its lowest level in 35 years. With inflation already running steeply uphill in the UK and everywhere else, loosening government revenue policy appears it will inflame an already troublesome market environment -- especially when new economic policy plans to finance spending with debt while interest rates continues to climb.
This also puts Great Britain out of step with the other major economies in the world, with the possible exception of Japan: everywhere else is taking their medicine and tightening monetary policy, led by the U.S. and the Fed’s determination to defeat inflation even at the risk of an economic recession. Aside from creating chasms in Treasury markets worldwide, it also is generating a whole new set of questions about the global economy going forward. And we know how the market feels about uncertainty.
It feels like a winter storm, even though we’ve only just started autumn. After today’s open, we’ll see new data on S&P PMI, in both Manufacturing and Services for September. The former is expected to stay in-line with the previous month, and above the 50-line between expansion and contraction, while the latter looks to improve from 43.7 posted in August, but still sub-50.
This afternoon, ahead of the weekend we hope everyone is able to enjoy despite the roiling of the markets today, a FedListens event takes place, which will be moderated by Fed Vice Chair Lael Brainard and Fed Governor Michelle Bowman, with an opening statement made by Fed Chair Jay Powell. We hope he’ll stay away from uttering words like “pain” and “stagflation,” at least while the market remains open.
Questions or comments about this article and/or its author? Click here>>
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Market Open to Take Out 2022 Lows
Friday, September 23, 2022
It’s an unfortunate development, especially for those of us looking to pull from our 401k portfolio upon retirement in the near term: the stock market is going to open at its lowest levels of the year. It’s of scant delight someone in this position would heed the advice, “So now’s the time to put more money to work in the market.”
But to stay invested, or at least take some of that sideline cash you’ve (hopefully) amassed and buy high-quality equities as their valuations are reduced to multi-multi-year lows, is indeed the remedy here. If you can afford to have patience in this market, that’s what will pay off.
With the 10-year Treasury bill yield climbing up over 3.8% this morning (it has since abated somewhat) and the 2-year sprinting past 4.2% — its highest level in 15 years — we’re starting to see bonds become more attractive, which is naturally drawing some investment out of equities currently. I mean, a 4%+ yield on a 2-year bond does look a lot better than a negative return on a “growth” equity that may not show earnings for at least two years. In other words, TINA (“There Is No Alternative” to stocks) has left the building, at least temporarily.
We wake up learning about new economic policy coming out of the UK: an issuing of the biggest tax cuts in 50 years. This looks to have created a destabilization on the global markets this morning, with the British pound plunging versus the U.S. dollar to its lowest level in 35 years. With inflation already running steeply uphill in the UK and everywhere else, loosening government revenue policy appears it will inflame an already troublesome market environment -- especially when new economic policy plans to finance spending with debt while interest rates continues to climb.
This also puts Great Britain out of step with the other major economies in the world, with the possible exception of Japan: everywhere else is taking their medicine and tightening monetary policy, led by the U.S. and the Fed’s determination to defeat inflation even at the risk of an economic recession. Aside from creating chasms in Treasury markets worldwide, it also is generating a whole new set of questions about the global economy going forward. And we know how the market feels about uncertainty.
It feels like a winter storm, even though we’ve only just started autumn. After today’s open, we’ll see new data on S&P PMI, in both Manufacturing and Services for September. The former is expected to stay in-line with the previous month, and above the 50-line between expansion and contraction, while the latter looks to improve from 43.7 posted in August, but still sub-50.
This afternoon, ahead of the weekend we hope everyone is able to enjoy despite the roiling of the markets today, a FedListens event takes place, which will be moderated by Fed Vice Chair Lael Brainard and Fed Governor Michelle Bowman, with an opening statement made by Fed Chair Jay Powell. We hope he’ll stay away from uttering words like “pain” and “stagflation,” at least while the market remains open.
Questions or comments about this article and/or its author? Click here>>