Asset class and style returns by JP Morgan
As bonds and stocks fell simultaneously, commodities were the notable outperformer in Q3, returning 4.7% and echoing the market dynamics of 2022. Source: JP Morgan
US 10y yields keep rising with most of the increase is due to the rise in real yields. US 10 year yields is now at 4.65%, 10 year real yields at 2.29%
Source: Bloomberg, HolgerZ
The US Bond Market has now been in a drawdown for 38 months, by far the longest bond bear market in history
The US Bond Market has now been in a drawdown for 38 months, by far the longest bond bear market in history
The S&P’s price has diverged from the trend for EPS estimates recently
The rise in bond yields probably explains this dichotomy
Is the golden era of 60/40s coming to an end?
And if equities / bonds correlation stay positive, which asset classes should be added to portfolios? hard assets and commodities? alternatives (private debt, private equities, etc.)? cash on an opportunistic basis? Source chart: Tavi Costa, Bloomberg
Yes you can lose a lot of money with bonds...
The Pimco 25+ Year Zero Coupon US Treasury ETF is off more than 60% from its high
If US Treasuries would the stock market, the current drawdown for long for the stock market in history
Source: Michael Gayed
US 10 year yields keep rising in tandem with oil
WTI oil now trades at $93.5/bbl. So is oil & inflation fears the only reason for bond yields to move upward? Probably not. The fact that real yields are also on the rise shows that inflation is not the only culprit. Investors are adjusting to the reality of rates staying high for longer than expected. They are also requesting positive real yield to get compensated for being invested in US treasuries at the time the US Treasury is issuing massive amount of debt while the FED keeps shrinking its balance sheet through QT. Source chart: Bloomberg
