The expected inflation data for August turned out to be weaker than expected, which turned out to be good news for the bond market, but not for a stock market that has been struggling this month.
That bond yields are so low at 5% inflation in the north has helped lift stocks, with the S&P 500 SPX,
even after its sixth loss in seven sessions, it is still up 18% this year.
Eddy Elfenbein, portfolio strategist at the AdvisorShares Focused Equity ETF and editor of the Crossing Wall Street blog, decided to examine the correlation between inflation-adjusted bond yields and equities.
“If someone says the bag is cheap or expensive, is it natural that you should ask, compared to what? Judging by the stock, the ten-year Treasury yield is a good place to start. The problem with looking at Treasury yields is that inflation can affect them a lot. This is where [Treasury inflation-protected securities] it comes in because these bond yields are adjusted for inflation, ”he says.
Since 1983, he found that in the days when ten-year TIPS got 1.67% higher, the stock market, as measured by the Wilshire 5000 W5000,
has had a negative return. But when yields have been zero or lower, the stock market has achieved an average return of more than 38%.
The turning point seems to be 0.5%: when the yield on ten-year TIPS is at least 0.5%, stock market return has been 5.1%; but, when it is lower, the stock market has made gains of 23.3%.
The yield on ten-year TIPS on Tuesday was -1.05%, approaching a record low. “Right now, the bond market is giving more good news for stocks,” Elfenbein said.
The buzz
Chinese President Xi Jinping did not accept the invitation to meet with U.S. President Joe Biden, the Financial Times reported. Biden told a White House reporter joke that the story was not true.
Chinese economic data worsened than expected, with retail sales rising just 2.5% year-on-year, its worst performance in 11 months. The U.S. economic calendar includes publications on the New York Fed’s Empire State manufacturing index, import prices, and industrial production.
Microsoft MSFT,
said it was increasing its dividend by 11% as it authorized a repurchase of shares of up to $ 60 billion.
Las Vegas Sands LVS,
at Wynn Resorts WYNN,
fell sharply in the premarket trade due to concerns about possible regulation in Macau.
Dutch coffee chain and high-performance shoe maker On Holding debut in the stock market on Wednesday.
California Gov. Gavin Newsom easily defeated a recovery effort.
SpaceX is scheduled to launch four citizens, including Shift4 Payments FOUR,
founder Jared Isaacman: in space.
The market
US stock futures ES00,
NQ00,
increased after the recent chain of declines. The performance of the Treasury TMUBMUSD10Y at 10 years,
fell to 1.27%.
European wholesale natural gas prices rose after a major fire at a key electricity conversion station shut down a cable carrying electricity from France to the UK
Random readings
Chinese real estate developer fighter Evergrande 3333,
offered parking spaces to his debtors, which they did not accept.
Bitcoin billionaires are trying to resurrect woolly mammoths.
Rest in peace, Norm Macdonald. Here’s a joke he explained harness.
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