Will the new Stimulus cause the 10 year yields to go up? And still affecting Nasdaq?

[cyber888]

So, Friday, even with yields at 1.55%, Nasdaq turned positive.

We've got a new stimulus. Will the 10 year yield push up above 1.6% ? Will it still affect the Nasdaq, or you think the Tech stocks are oversold?

If you're trading Tech, what's your strategy next week - buying, selling or hold?

 

[njhowie]

In my view, the jury is out on the effect.

On the one hand, stimulus means more money in hands ready to spend it, helping GDP, spurring demand, and contributing to inflation.

On the other hand, is GDP growth very meaningful if the growth comes entirely from the government showering everyone with free money? What happens when the spigot is turned off?

As far as the 10-year, Powell has said that he wants inflation, and the interpretation was that he will not step in to cap rates. However, in the days prior to his latest announcement, market gurus were certain that the Fed would be stepping in soon, because higher rates are a very big problem as it will increase borrowing costs and servicing costs. How will the government be able to pay increased rates on debt? By printing even more money? Where does it end? When does the market lose confidence in the currency and lead to a collapse?

We've seen Powell say similar two years ago - when he was set on raising rates. Within a few weeks, as the market and POTUS muscled him to do otherwise, he completely reversed course and lowered rates multiple times.

As far as the market reaction - it all continues to be extremely overvalued in my view. The market has and continues to be extremely irrational. That is why we see so many ridiculous things happening - Gamestop, Bitcoin, NFT, SPACs - the list goes on and on.

Best advice - watch your step.

 

[cyber888]

How will the government be able to pay increased rates on debt? By printing even more money? Where does it end? When does the market lose confidence in the currency and lead to a collapse?

This is the key here with so much debt.

 

[Lsbcal]

So, Friday, even with yields at 1.55%, Nasdaq turned positive.

We've got a new stimulus. Will the 10 year yield push up above 1.6% ? Will it still affect the Nasdaq, or you think the Tech stocks are oversold?

If you're trading Tech, what's your strategy next week - buying, selling or hold?

I don't see why just yields are the reason for growth stocks to be going down. There have been big positive moves in tech stocks when rates were shooting up. Clearly rising rates are not the whole story.

Since you asked, I traded out of large growth in February. Bought small cap value and mid cap value. This is based solely on momentum and not done in taxable accounts. I'm doing this pragmatically and trying to keep the emotion out of investing. Just trying to make more of that filthy stuff.

 

[Montecfo]

I think rising rates ARE a big part of the story, but so is the theme of a reopening economy making travel and other cheaper reopening stocks and cyclicals more attractive, causing the high fliers to sell off. We first saw hints of this last fall.

The market is already discounting the new $1.9T bill.

I think I have been reading that the 10 year will be at 2 percent by year-end. That seems highly plausible.

This rotation into reopening stocks will continue I expect, though the high-fliers are not going away. They have a lot of future growth coming after a bit of re-rating.

The Powell Fed will keep rates from getting too high since this is essential to keep the debt manageable.

I think there will be trepidation around Powell's tenure. I kind of doubt Biden will renominate him which could signal an inflection point.

 

[Lsbcal]

I would rank the reopening theme (favoring value stocks over growth) probably much higher then 10yr Treasuries going up. We really don't know that rates will go up. True the movement has recently been up.

Has the market discounted everything (high growth PEs, rising rates, stimulus passing)? Stay tuned.

And what if B.1.1.7 variants cause a new covid surge? That is a worry but I don't think any of us will be ahead of the markets on that should it happen as some epidemiologist worry it could. Stay tuned.

 

[Running_Man]

I think rising rates ARE a big part of the story, but so is the theme of a reopening economy making travel and other cheaper reopening stocks and cyclicals more attractive, causing the high fliers to sell off. We first saw hints of this last fall.

The market is already discounting the new $1.9T bill.

I think I have been reading that the 10 year will be at 2 percent by year-end. That seems highly plausible.

This rotation into reopening stocks will continue I expect, though the high-fliers are not going away. They have a lot of future growth coming after a bit of re-rating.

The Powell Fed will keep rates from getting too high since this is essential to keep the debt manageable.

I think there will be trepidation around Powell's tenure. I kind of doubt Biden will renominate him which could signal an inflection point.

If the Federal Reserve was not buying 120 BILLION of bonds each and every month 10 year treasuries would be at 5 percent. Interest rates signal nothing since 2007, they are merely a trackable cost for corporations. If they have to they will as Japan has done buy every single bond issued or require banks to buy them as reserves. However the Fed cannot control directly the money supply, only indirectly. And this issuance of 1200 dollars to most Americans and $300 per month per child beggining in JULY, which will be spent will increase money supply even further than it presently growing from absolute historic levels.

When inflation is at 4 percent and long term rates are at 2 percent, the outright theft of savers money as a FED tax will be quite apparent. All stocks could easily go up quite a bit in this scenario as noone would want to buy long bonds, leaving the FED to buy them and all the slushing money moving into the market.

 

[Lsbcal]

If the Federal Reserve was not buying 120 BILLION of bonds each and every month 10 year treasuries would be at 5 percent. Interest rates signal nothing since 2007, they are merely a trackable cost for corporations. If they have to they will as Japan has done buy every single bond issued or require banks to buy them as reserves. However the Fed cannot control directly the money supply, only indirectly. When inflation is at 4 percent and long term rates are at 2 percent, the outright theft of savers money as a FED tax will be quite apparent.

Theft of savers money? It has been very clear that savers are in the dog house. When rates were declining bond investors (are these savers?) were compensated with fat cap gains. Now we have the nightmare scenario for the near term at least.

This is not quite the OT here but the Fed has been signalling for months that investors should take risks and so pump up the economy thus compensating for the depressing effects of Covid on business.

The message to me at least: do not be a saver.

I doubt what I've written here is news to anyone. But let me know if I'm wrong.

 

[Montecfo]

I saw a report that the AstraZeneca vax is effective against Brazilian variant.

https://www.reuters.com/article/us-health-coronavirus-brazil-variant-exc-idUSKBN2AX1NS

 

[Montecfo]

If the Federal Reserve was not buying 120 BILLION of bonds each and every month 10 year treasuries would be at 5 percent. Interest rates signal nothing since 2007, they are merely a trackable cost for corporations. If they have to they will as Japan has done buy every single bond issued or require banks to buy them as reserves. However the Fed cannot control directly the money supply, only indirectly. And this issuance of 1200 dollars to most Americans and $300 per month per child beggining in JULY, which will be spent will increase money supply even further than it presently growing from absolute historic levels.

When inflation is at 4 percent and long term rates are at 2 percent, the outright theft of savers money as a FED tax will be quite apparent. All stocks could easily go up quite a bit in this scenario as noone would want to buy long bonds, leaving the FED to buy them and all the slushing money moving into the market.

If interest rates were are 5 percent equities would have a much much lower value. Careful what you wish for.

The low rates are worth it and we still have 10 million or so unemployed. Not the time for Fed tightening in my opinion.