Interest Rates are Headed Higher. Are You Ready?

Over the past several weeks we’ve been witnessing equities go through an “adjustment period” as the reality of Fed “tapering” and ultimately removing QE sets in.  Because this adjustment is an ongoing process, I don’t know if last week was just a typical correction and now it’s time to get “all in” in equities broadly.

But, the clear takeaway from last week was that Fed “tapering” remains very much on schedule, and as a result we should see continued downward pressure on bonds/upward pressure on rates.

I know that successful investing/trading is best achieved by finding clear trends in sectors & corners of the market, so if stocks will continue to “adjust” to the prospects for lower bonds/higher rates, then let everyone else worry about the “broad” market’s near term direction, while we get incrementally more long things that do well in a rising interest rate environment (some names to consider are: TBF, TBT, SJB, financials, equities broadly, and very selectively, hard asset related sectors and stocks).

So, put bluntly, stop worrying about where how to market is going to adjust to higher rates, and instead just get “long” higher rates – that’s the definitive trend in the market right now. 

Economic data remains critical (it’s the one thing that can de-rail the “tapering” narrative), and the FOMC meeting on the 19th is the next major catalyst.  Nothing really important happens domestically this week, though.  So, as long as Japan behaves, I think we’ll see a continued drift higher in broad markets this week.