Rates And The Yield Curve Rise

Published Fri, 23 Oct 2020 02:30:52 -0400 on Seeking Alpha

Seeking AlphaEconomy | Market OutlookRates And The Yield Curve RiseOct. 23, 2020 2:30 AM ET|| Includes: BIL, DDM, DFVL, DFVS, DIA, DOG, DTUL, DTUS, DTYL, DXD, EDV, EEH, EGF, EPS, EQL, FEX, FIBR, GBIL, GOVT, GSY, HUSV, IEF, IEI, IVV, IWL, IWM, JHML, JKD, OTPIX, PLW, PSQ, PST, QID, QLD, QQEW, QQQ, QQQE, QQXT, RISE, RSP, RWM, RYARX, RYRSX, SCHO, SCHR, SCHX, SDOW, SDS, SH, SHV, SHY, SPDN, SPLX, SPUU, SPXE, SPXL, SPXN, SPXS, SPXT, SPXU, SPXV, SPY, SQQQ, SRTY, SSO, SYE, TAPR, TBF, TBT, TBX, TLH, TLT, TMF, TMV, TNA, TQQQ, TTT, TWM, TYD, TYO, TZA, UBT, UDOW, UDPIX, UPRO, URTY, UST, UWM, VFINX, VGIT, VGLT, VGSH, VOO, VTWO, VUSTX, VV, ZROZby: Todd SullivanTodd Sullivan Hedge Fund Manager, Long/Short Equity, ValueValue Plays.cls-1{fill:#024999;}SummaryAs short-selling bans ended, the US$ has returned to pre-COVID levels. $WTI remains well below pre-COVID levels.
Historical studies reveal that US loan activity rises when the spread between T-Bills/10yr Treasury is above 0.20%.
Advice to investors remains the same. Invest solely in US Domestic equities and avoid fixed income.
The US$ is normalizing to pre-COVID levels after rising sharply during the panic of COVID. US$ strength was due to a rise in global investor fears which drove capital to US markets. Part of this rise occurred on the heels of European bans on short-selling, a technique used to hedge portfolio declines. With the US markets the only liquid market permitting short-selling, capital flooded the US. Another hedge applied was shorting oil futures. $WTI hedges drove prices briefly below (negative) - $30+/BBL. A price level never witnessed previously. Such has been the impact of algorithmic trading. As short-selling bans ended, the US$ has returned to pre-COVID levels. $WTI remains well below pre-COVID levels.
The earlier thesis that Modern Portfolio Theory (MPT) seeking returns in EmgMkts has boomeranged back to Western Sovereign Debt and real estate markets appears intact. Sovereign Debt rates remain... Read more