This chart is from Michael Kahn's Wednesday Barron's column (sub required).His take from this chart is that there is not much to stop the ten-year yield from going up to 5%. The general tone of the article is that higher rates are bad for stocks and he expects lower prices.
He does not think this will be a deathblow but he may change his outlook if yields go above 5%.
4 comments:
I noticed that many International funds {to include emerging markets, Eastern Europe and Latin America} have been hit VERY hard this week, some down 7% or more, is this a minor correction? What's your feel on this???
Remember that song, " What goes up....must come down....spinning wheels got to go round..."? jk
Rates will kill stocks. Expected ever since they (rates) started rising.
NOticed today on Bloomburg TV Merrill Lynch guy stating that they were "Holding Firm that rates would not go above 4.75%" Kiss Of Death for rates if you ask me.
Lots of talk on BOTH sides. Economy will slow---rates will ease---real risk is deflation.
Then on the other---rates will have to go up to defend the dollar---Chinese will not buy as many dollars and will istead buy gold, oil, etc. We will print up some money to keep economy going. And rates keep going up.
Only time will tell...
g
It would be very intereseting and maybe instructive to see a large poll on the actual rate that would take current stock investors away from stocks and into fixed money instruments. I am not sure, having only begun to think about it, but right now I would say I would move from 70% stocks to 60% at a yield of 5.75 from very safe and liquid sources, maybe changing a percentage point or two along the way. At 7% yield I'd think things would be too different from now for me to judge. Inflation factors might significantly change the dynamics.
smasker
My vote is that 4.9% on the 10 yr will be the tipping point.
og
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