What rising rates mean for market breadth
-
Jason Goepfert
Published: 2021-03-01 at 09:00:00 CDT
The 10-year yield registered a 252-day high on late last week. This is the first occurrence since the last 252-day low in August.
Typically, rising interest rates reflect positive trends in the economy and operate with a lag on future growth. Out of all cycles from a one-year low to one-year high in yield, this one is showing one of the smallest net changes in yield, because of its low starting level.
While forward returns in indexes were fine, there is a notable wrinkle - breadth tended to deteriorate.
The table below shows the percentage of S&P 500 members with a rising 200-day moving average after the 10-year yield cycled from a one-year low to one-year high. Please note, the numbers in the breadth table reflect the net change in the percentage of members with a rising 200-day moving average.
While most of the instances started from a high level, higher rates will impact certain industries. With policy rates on hold and the Fed conducting QE, it will be fascinating to see what happens with rates and the yield curve over the next 6-12 months. The implications for asset allocation could be profound.
What else we're looking at
- Full returns in major stock indexes, assets, and sectors following a full cycle in the 10-year yield
- An in-depth look at a "quick and dirty" hedge in QQQ
- What happens after gold suffers a loss like last week's
| Stat Box For the first time in more than 70 days, there were more securities hitting a 52-week low on the NYSE than a 52-week high. It's unusual to see this happen so soon after indexes hit record highs - it's happened only 10 other times since 1965. |
Sentiment from other perspectives
Mo' money, mo' problems. If that's still the case, then recent public offerings are in the clear, because they're not making any money. More than any time in history, investors are willing to swallow gigantic IPOs with absolutely no record of ever turning a profit. Or sales. Source: Wall Street Journal
Not bullish on bonds, though. Twitter users are very optimistic on stocks (obv) which usually means they're less optimistic on other assets like bonds, which certainly seems to be the case. Source: Topdown Charts
That's because they've had one of the worst starts, ever. Losses on bonds so far in 2021 are challenging some of the worst starts to a year in history. Source: Arbor Research via Jeroen Blokland
Related Posts:
- In a broad global recovery, China stands out
- NYSE Advance-Decline Line Divergence Risk-Off Model
- Percentage of members above the 50-day average risk-off signal
- A recovery like few others
- Percentage of members above the 50-day average buy signal
Tagged As:
The post titled What rising rates mean for market breadth was originally published as on SentimenTrader.com on 2021-03-01.
At SentimenTrader.com, our service is not focused on market timing per se, but rather risk management. That may be a distinction without a difference, but it's how we approach the markets. We study signs that suggest it is time to raise or lower market exposure as a function of risk relative to probable reward. It is all about risk-adjusted expectations given existing evidence. Learn more about our service , research, models and indicators.
Follow us on Twitter for up to the minute analysis of market action.
Follow @sentimentraderNot ready to signup up for a free trial yet?
Signup for our Daily Lite email to receive highlights of our daily report, research and studies.
Follow us on Twitter:
Follow @sentimentraderSubscribe to our Youtube Channel:
RSS Feed
Subscribe to the Blog RSS feedTags
Recent Blog Posts
Brought to you by:
>