Asset Trend Review
What a difference the last two weeks made! As it stands right now:
- S&P 500 stock index is at all time high
- 10 Year Treasury bond yield is at all time low
- Germany, Japan and Switzerland 10 year government bond yields: negative
- Britain, France, Spain, Italy 10 year government bond yields are all lower than the U.S:
What happened after Brexit referendum is that interest rates in all major countries fell with the belief of possible strong central bank support or intervention. Friday’s US job report made investors believe that the risk of US economy weakening is removed and it is now in a robust trajectory. This caused a flurry to buy stocks, pushing S&P 500 to its all time high.
In all fairness, US 10 year Treasury bond yield is still the highest among major developed countries. This is strange as US credit situation is better than that of most of these other countries. However, with all countries are racing to the bottom for yields, investors naturally push US yield further down. Granted, the reasons behind all the asset price movement are more than the above (for example, the currency war is one of the main factors driving sovereignty bonds’ price lower). Nevertheless, what a inter-connected world!
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