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/biz/ - Business & Finance

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30384960 No.30384960 [Reply] [Original]

Do rising yields have a negative effect on equities because
a) long-terms bonds are a more attractive investment -> bond/equity rebalancing
b) fear of the Fed raising short-term interest rates to dampen inflation

>> No.30385016

>>30384960
That sounds about right

>> No.30385051

>>30384960
more or less

>> No.30385110

>>30385016
>>30385051
Does a precede b chronologically?

>> No.30385182

>>30385110
..and where would you say we are now?
I'm confused because long-term Treasury bond yields are still near historical lows and the Fed has repeatedly stated they are committed to keeping short-term rates pegged near zero. So why the sudden selloff?

>> No.30385220

How about this: You open up the free spx chart and see what happens when interest rates rise. What happens over the course of the year? Let me save you some time: It goes up and all the dips are fake. Every single time. Now, go live your life and Buy Every Dip

>> No.30385266
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30385266

>>30385220
I have looked..

>> No.30385422

>>30385266
Your picture has nothing to do with what I just said. When interest rates rise, that means the economy is rebounding and the market goes up over the course of the year. The "crash after inversion" already happened last year.

>> No.30385523

>>30385422
The 5Y-20Y spread is reflective of a steepening yield curve, which points at rising rates on higher inflation expectations.
If people truly are spending more money, doesn't it seem likely that the Fed will intervene and hike short-term rates?
After all, the effects of inflation are only felt when product of the money supply and its velocity grow faster than real GDP.

>> No.30385679

>>30385523
it doesnt matter because like I said the market goes up when interest rates rise and all the dips are fake 5-7% drops. The only exception was december 2018 when the Fed overdid it and immediately stopped when realizing their mistake

>> No.30385701

>>30385679
Then explain Japanification, ie. the lost decade

>> No.30385793

>>30385701
Japan is an island nation. And they have only gone up since they started copying American QE in 2012

>> No.30386022
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30386022

>>30385793
So MMT effectively invalidates the business cycle? What happens if weimar hyperinflation occurs?

>> No.30387123

>>30385266
Rates go from low to moderate - bullish
Rates go from moderate to high - bearish

>> No.30387401

>>30385701
>japanification
Think about Japanese. They are hyperconservative. Financially after 1991 businesses and households deleveraged. Also you can compare japs' budget to ours. They spend a lot more on industry and infrastructure where as we spend on SS Medicaide benefits, and gibs (60% of fy21 budget) we also spend 8% paying interest on our outstanding debt and another 5% for military-specific gibs and retirement obligations. So 73% of our budget is unproductive spending. Argentina is a better comparison to the US.
>corruption
>unproductive spending
>inefficient businesses
>no exports
>population of Spanish speaking mutts
>lost all wars in the past 60 years

>> No.30387701

>>30387123
Makes sense based on current trends.
Must be based on relative percent increase rather than on historical rates.
>>30387401
Modern monetary theory suggests that debt monetization is fine, so long as inflation is controlled. My fear is that unprecedented QE and increasing M2 velocity (as a result of economic expansion) will cause runaway inflation and severe dollar devaluation. America, unlike Argentina, cannot rely on dollarization to get us out of an hyperinflationary spiral.

>> No.30387861

>>30387701
low to mid: yay, economy is doing fine
mid to high: oh no, economy is overheating

>> No.30387927

>>30387701
Well seems like the solutions are clear.
1. Make QE less unprecedented
2. Stop economic expansion with more lockdowns
>OH NO new strain of Brazilian sopa do macaco covid discovered!! Shut it down!!
People have put up with lockdowns for more than a year now. Will be very easy to control.
Cost push inflation is already happening bigly though.

>> No.30387945

>>30384960
Yes. Also there is a boomer circular argument about discounted cash flows that hurt growth stocks when rates go up.

>> No.30388227

>>30387945
I wouldn't call them circular arguments. Future cash flows mean less the higher the weighted average cost of capital - a value determined by interest rates.