May 21, 2018: Rising Rates, Consumer Staples And Stock Index
by MyPlanIQ | May 22, 2018 | Asset-Allocation, Bonds, Economy, Feature, Gold, Headline, Income, Inv, Investments, IRA, Markets, Mutual-Funds, newsletter, Portfolios, Retirement
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Rising Rates, Consumer Staples And Stock Index
Last week, long term interest rates continued to rise. 10 year Treasury bond’s yield is now above 3%, a much touted psychological level:
Short term interest rates also rose. The following table shows how T-Bill, money market fund and brokered CDs rates for 3 month and 1 year:
| Security | Annualized Yield |
| Prime Money Market (Vanguard Prime MM) | 1.88% |
| 3 Month Treasury Bill | 1.9% |
| 3 Month CD | 1.8% |
| 1 Year Treasury Bill | 2.36% |
| 1 Year CD | 2.25% |
We again observe that Treasury Bills’ yields are higher than their CD equivalent, somewhat unusual as T-Bills are considered to be the safest and thus should yield less.
All of these are thought to spell trouble for rate sensitive stocks.
Rate sensitive stocks in trouble
The following table compares S&P Consumer Staples sector ETF (XLP), Utility sector ETF (XLU), REITs (Vanguard REITs ETF VNQ) and S&P 500 (SPY). These sectors are the most sensitive to interest rates:
As of 5/18/2018
XLP has the worst year to date return while all of the 3 rate sensitive sectors have negative YTD returns, compared with SPY’s 2.5%.
US Sectors Trend 05/17/2018
| Description | Symbol | 13 Weeks | 26 Weeks | 52 Weeks | Trend Score |
|---|
| Consumer Staples | XLP | -8.97% | -7.59% | -6.45% | -5.06% |
| Telecom | IYZ | -3.02% | -2.67% | -13.16% | -4.52% |
| Utilities | XLU | 0.12% | -10.68% | -1.72% | -3.69% |
| Healthcare | XLV | -1.45% | 2.87% | 13.0% | 3.29% |
| Industries | XLI | -2.3% | 7.07% | 17.31% | 4.23% |
| Materials | XLB | -0.76% | 3.95% | 17.6% | 4.61% |
| Financial | XLF | -2.19% | 8.88% | 24.17% | 6.32% |
| Consumer Discretionary | XLY | 0.3% | 13.8% | 20.34% | 7.13% |
| Technology | XLK | 3.44% | 9.55% | 28.15% | 8.6% |
| Energy | XLE | 16.91% | 19.77% | 21.89% | 13.09% |
The cyclical sectors like energy, technology and consumer discretionary are the top 3 performing sectors.
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