I recently joined the great Stuart Varney on Fox Business to discuss bond yields, the election, the Fed, the market outlook, misconceptions about the “Trump Trade,” and a lot more. Here are a few things to keep in mind about the iShares 20+ Year Treasury Bond ETF (TLT) – and stocks, writes Tom Hayes, editor of HedgeFundTips.
Money is moving out of bonds. The last time we saw this abrupt of a move (two standard deviations) out of bonds in one month was 2001-2003. That preceded some of the biggest moves in history for US small caps and emerging markets equities.
Meanwhile, I told Stuart we have a tale of two cities in markets. Indices look a bit stretched in the short term, but many individual companies look like bargains. Markets SEEM to be pricing in “pro-business” policies coming to the White House (i.e. a Trump win). And if so, these newer themes will persist:
- Un-Magnificent 493 will outperform Magnificent 7 (earnings growth accelerating for 493, decelerating for 7).
- Small caps will outperform large caps by 11% in the first 12 months following the first rate cut.
- Value will outperform growth in the first six months following the first cut.
- Emerging markets will outperform developed markets as the US dollar continues to weaken.
