For the first time in the last 5 decades, rising interest rates have failed to cause Stock P/E multiples to contract
Source: Barchart
Big opportunities ahead for fixed income investors?
The past three years' pain in bonds could indeed be setting the stage for outsized gains ahead. To put the decline into perspective, long-term government bonds, with maturities greater than 20 years, have dropped 50% from their 2020 peak, a drawdown that is comparable to the 56% decline in stocks during the height of the Global Financial Crisis in 2008 Source: Edward Jones
9% of bonds are set to mature in the next 2 years → The highest level since the Financial Crisis
High interest rates will make refinancing more difficult Source: Game of Trades
US 10-year Yield pullback from last week peak
US 10-year Yield pullback sharply from last week peak. After the Non-Farm Payrolls report on Friday, the US 10-year Govt Yield came close to hitting 4.9%. As of today, that Yield is down below 4.6%.
Rising real rates are going to inflict real pain on a variety of asset classes, particularly longer duration risk
BofA, Markets & Mayhem 🤖
US 30Year Yield reaches 2007 High
The US 30-year yield rose to the highest level since 2007. This week's Treasury selloff came after US lawmakers managed to avert a government shutdown, prompting traders to increase bets that the Federal Reserve will raise rates in November.
As highlighted in a tweet by HolgerZ, the S&P 500 is running in tandem with the Fed net liquidity
So it's not so much the peak or pause in rate hikes that matters, but rather what happens to the Fed balance sheet & reverse repo operations. Source: HolgerZ, Bloomberg
World trade volumes fell at their fastest annual pace for almost three years in July
Closely watched figures signal rising interest rates are beginning to impact global demand for goods. Trade volumes were down 3.2 per cent in July compared with the same month last year, the steepest drop since the early months of the coronavirus pandemic in August 2020. The latest World Trade Monitor figure, published by the Netherlands Bureau for Economic Policy Analysis, or CPB, followed a 2.4 per cent contraction in June and added to evidence that global growth was slowing. After booming during the pandemic, demand for global goods exports has weakened on the back of higher inflation, bumper rate rises by the world’s central banks in 2022, and more spending on domestic services as economies reopened following lockdowns. The about-turn in export volumes was broad based, with most of the world reporting falling trade volumes in July. China, the world’s largest goods exporter, posted a 1.5 per cent annual fall, the eurozone a 2.5 per cent contraction, and the US a 0.6 per cent decrease. Source: FT
