GLOBAL INTEREST RATES: WHAT ARE THE PRUDENT QUESTIONS AND APPLICATIONS?

 

Technical analysis doesn’t always provide the answer, but many times it helps you ask the right questions and trade/invest accordingly. Consistent with this, the month of September was kind to domestic and certain overseas interest rates, defined by the 10-year yield. In other words, interest rates in the U.S. and many overseas countries rose during the month of September—charts below.

 September was kind to domestic and certain overseas interest rates, defined by the 10-year yield. In other words,  interest rates in the U.S. and many overseas countries rose during the month of September .
 September was kind to domestic and certain overseas interest rates, defined by the 10-year yield. In other words,  interest rates in the U.S. and many overseas countries rose during the month of September .

What might higher global 10-year yields imply? Do higher global yields suggest a strong (stronger than expected) global economy and in turn higher worldwide inflation? Do higher domestic interest rates mean there is now competition for stocks, which could lead to lower stock prices? The 3-month treasury yield rate on 9/27/18 was 2.14% and the S&P 500 dividend yield at the end of August was 1.76%, according to the YCharts website. Are Central Banks now accommodative, restrictive, or somewhere in between? Could it be all of these things, a combination, or nothing at all?

 Summary: We will know the answers to the questions above in the fullness of time. In the meantime, while the charts above show that 10-year interest rates are lower than they were 10 years ago, I have felt since late 2016/early 2017 that the secular bond bull market was ending. In mid-2017 that opinion looked foolish, but not so much now. In other words, when it comes to positioning your fixed income holdings, please prepare for higher domestic and global yields.

 Day Hagan Asset Management appreciates being part of your business, either through our research efforts or investment strategies. Please let us know if we can do any additional work for you. 

UPCOMING EVENTS

Art Huprich, CMT
Chief Market Technician
Day Hagan Asset Management

—Written 10.01.2018. Chart source: Stockcharts. Table source: LPL Research

PDF Copy of Article: Day Hagan Tech Talk October 1, 2018 (pdf)

Disclosure: The data and analysis contained herein are provided "as is" and without warranty of any kind, either expressed or implied. Day Hagan Asset Management (DHAM), any of its affiliates or employees, or any third-party data provider, shall not have any liability for any loss sustained by anyone who has relied on the information contained in any Day Hagan Asset Management literature or marketing materials. All opinions expressed herein are subject to change without notice, and you should always obtain current information and perform due diligence before investing. DHAM accounts that DHAM or its affiliated companies manage, or their respective shareholders, directors, officers and/or employees, may have long or short positions in the securities discussed herein and may purchase or sell such securities without notice. DHAM uses and has historically used various methods to evaluate investments which, at times, produce contradictory recommendations with respect to the same securities. When evaluating the results of prior DHAM recommendations or DHAM performance rankings, one should also consider that DHAM may modify the methods it uses to evaluate investment opportunities from time to time, that model results do not impute or show the compounded adverse effect of transactions costs or management fees or reflect actual investment results, that some model results do not reflect actual historical recommendations, and that investment models are necessarily constructed with the benefit of hindsight. For this and for many other reasons, the performance of DHAM’s past recommendations and model results are not a guarantee of future results. The securities mentioned in this document may not be eligible for sale in some states or countries, nor be suitable for all types of investors; their value and income they produce may fluctuate and/or be adversely affected by exchange rates, interest rates or other factors.

Investment advisory services offered through Day Hagan Asset Management, an SEC registered investment advisory firm. Accounts held at Raymond James and Associates, Inc. (member NYSE, SIPC). None of the entities listed here in this disclosure are affiliated.