Market Update March 24, 2021

Market Update March 24, 2021

April 02, 2021

Rising bond yields and improving economic conditions led to a choppy week of trading that ended in modest losses for investors.

There’s an old Wall Street axiom that says, “markets climb a wall of worry.” These days, there is plenty to worry about with the trend in long-term interest rates.

The 10-year Treasury yield in recent weeks moved above 1.75% (the highest in 14 months), and the 30-year Treasury topped 2.5% for the first time since August 2019. Mortgage rates are typically priced based upon the 10 year yield. Take the 10 year yield; add about 1.8% and you will be very close to the going rate for a 30 year mortgage. A good rule of thumb is that if you can save 1% on your long term interest rate, it may be a good idea to consider refinancing. I doubt we will see mortgage rates this low for some time once the Fed starts to raise lending rates to banks.

The stock market began the week on a positive note rising on optimism over the economic reopening and a decline in bond yields. Markets reversed themselves on Thursday as a surge in yields sent technology and other high growth stocks lower. We are witnessing a rotation from high tech into a broader based market recovery. This is both good and painful. Painful, because the once powerful FAANG stocks that led most of the recovery are now giving back a lot of the money that increased their values during the lock down. Anytime there is a market rotation, it usually takes a few weeks for the rotation to take effect. Many analysts are expecting a 6.5% GDP (gross domestic product) this year. The economy is opening up, vaccinations are moving forward, and stimulus at unprecedented levels is coming into the economy. We have rotated our allocations to hopefully take advantage of what we see happening in the near future. This is good from the perspective that the recovery is becoming broader based. As an investor, it requires patience while the rotation is taking place

You’re likely to hear phrases like “market dislocation”, or other buzzwords, as pundits explain what’s happening in the bond market. But know that at Global View Capital Management, we’re keeping a close eye on the markets and are evaluating opportunities as events continue to unfold. The VIX is very low which indicates low market volatility. By years end, we are very optimistic that this will be a very good year.