The Five Archives - Page 2 of 5 - Porter & Co.

The big story in November was the dramatic return of risk-taking, as easing long-term interest rates and better-than-expected inflation data fueled renewed hopes of a “soft landing.” For example, large-cap tech stocks – represented by the Invesco QQQ ETF – saw their largest weekly inflows on record (from Barchart via X)…

Posted onDecember 3, 2023December 4, 2023AuthorPorter & Co.

Bullish options bets on small-cap stocks – via the iShares Russell 2000 ETF – also soared to a new record high (from The Daily Shot)…

Posted onDecember 3, 2023December 4, 2023AuthorPorter & Co.

And high-yield corporate bonds saw their biggest monthly inflows in at least five years (from Bloomberg)…

Posted onDecember 3, 2023December 4, 2023AuthorPorter & Co.

These moves occurred alongside a violent reversal in investor sentiment. This includes the largest one-week decline in bearish sentiment (from 50.3% to 27.2%) in the history of the American Association of Individual Investors (“AAII”) weekly survey (from AAII)…

Posted onDecember 3, 2023December 4, 2023AuthorPorter & Co.

And a return to “Greed” territory in CNN’s Fear & Greed Index after a brief dip into “Extreme Fear” last month (from CNN Business)…

With positive year-end seasonality kicking in (see Economics and Markets below), this rally could certainly continue a while longer. But history continues to suggest those betting heavily on a soft landing are likely to be disappointed (from Bloomberg)…

Posted onDecember 3, 2023December 4, 2023AuthorPorter & Co.

The big story this month was the continued rise in long-term U.S. Treasury yields. The yield on the benchmark 10-year Treasury note just touched 5% this week for the first time since before the Great Financial Crisis (from Bloomberg)…

Posted onOctober 30, 2023October 30, 2023AuthorPorter & Co.

However, unlike the rise in Treasury yields earlier this year, this recent rise isn’t due primarily to expectations of higher short-term rates (i.e., the Federal Reserve). Rather, in recent months, yields have been rising due to expectations of higher inflation (from Bloomberg via ZeroHedge)…

Posted onOctober 30, 2023October 30, 2023AuthorPorter & Co.

… as well as rising “term premium” – a measure of the added compensation investors demand for holding longer-duration debt – as a result of out-of-control government deficits (from Jurrien Timmer via X)…

Posted onOctober 30, 2023October 30, 2023AuthorPorter & Co.

This suggests the upward pressure on long-term yields could remain even if the Fed cuts short-term rates.

Unfortunately for equity investors, higher yields make stocks relatively less attractive. As you can see below, the “equity risk premium” – a measure of the difference between the expected return in stocks and the risk-free rate of return in Treasuries – has fallen to its lowest levels in decades (from The Daily Shot via X)…

Posted onOctober 30, 2023October 30, 2023AuthorPorter & Co.

In fact, by some measures, stocks are near their most expensive level versus bonds in the past 100 years. Previous extremes have led stocks to underperform bonds over the next decade, even if bonds themselves produced poor real (after inflation) returns (from Hussman Strategic Advisors)…

Posted onOctober 30, 2023October 30, 2023AuthorPorter & Co.