October 24, 2024
Good morning,
So far this week, we’ve seen the S&P 500 Index decline 3-days in a row – is a correction afoot? The Index is off –1.38% over those 3-days; it is more of a pause than anything else. And given that a correction is overdue for stocks while volatility remains elevated, this corrective-pause is another bullish sign for stocks heading into the election, where uncertainty usually takes a heavier toll than what we’ve seen so far this week.
Bond yields continue to climb (bond prices decline) for what could be several reasons. Traders have been over-aggressive in pricing Fed cuts into the year-end, while the current level of futures prices still implies an economy heading for a recession, there is yet no sign of one. The fiscal deficit that will have to be addressed next year and is coming into focus. This puts upward pressure on long-term bond yields. And inflation seems stickier than believed only a few months ago – look at gold rising in the face of higher yields and a stronger dollar (gold’s kryptonite normally).
All right, enough of the microscope. The point today is that the two prevailing trends – higher stock prices and higher bond yields – remain firmly intact.
Be well,
Mike
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