“How often have I said to you that when you have eliminated the impossible, whatever remains, however improbable, must be the truth?”
– Sherlock Holmes
It is dawning on me that the equity markets are heading higher as the bond market yields are heading lower once again finally, regardless of the machinations of Mr. Powell and Co. Utilizing data from the Bloomberg Indexes, we see the yields on Treasuries for the last year were 4.73%, as compared with the one-month yield of 4.73%.
Yippee!
This will also have a major effect on the IG Corporate Index, the High Yield Index, and the Municipal Bond Index. Lower yields also mean cheaper borrowing costs, which I expect to come to the fore as soon as spreads narrow. In my opinion, both will be good for the economy and for the equity markets and the fixed-income markets as well.
We are also beginning to see some green again in the stock markets, which has not been the case until the last week or so. Yes, there have been some exceptions, and yes, income has provided some shelter, but I am beginning to think that the notion of some sort of Santa Claus rally, or whatever you would like to call it, is on the horizon.
“You know my method. It is founded upon the observation of trifles.”
– Sherlock Holmes
While not trifling affairs, even the war in Ukraine and Gaza have not upended our recent rallies, which leads me to believe, subject to some sort of major escalation, that the American markets will have a continuing move to the upside. I spend hours every weekend going through the funds that I use for income, and I can report strengthening in almost every segment. This is one of the things that leads me to think that better times are at hand, and most of us will find that just delightful, I am sure.
I would further point out, in equities, that for the last month the DJIA has risen along with the S&P 500 and the NASDAQ. This leads me to believe that there will be good breadth in the upcoming stock markets and not just in one segment of them. This is also a positive, in my view, and one of the trifles that I am relying on.
I still urge caution. We are not out of the woods yet, but a little less caution may now be advisable. That is my opinion.
“You know my methods. Apply them.”
– Sherlock Homes
Original Source: Author
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