Election Investing, Stock Market Sweet Spot & Bonds Italian (Video)
Another episode with Tom Essaye and Adam Johnson on Market’s Bell discussing: Election Investing, Stock Market Sweet Spot & Bonds Italian Style.
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The Market’s Bell with WSJ Best-Selling Author Simon Constable
WSJ best-selling author Simon Constable puts a little British spin on the US economy where to invest now. He’s fun, brutally honest and wicked smart.
Is the Bond Bull Market Over? (Central Bank Preview)
SL: Is the Bond Bull Market Over? (Central Bank Preview)
In the next 24 hours we’re going to get the answer to two very important questions:
- Is the Bond Bull Market Over?
- Have We Seen the Highs in Stocks for 2016?
And, it’s the Bank of Japan that likely will decide the answers to those questions, which will decide whether we see a potentially sharp decline in both stocks and bonds.
I’m not one for patting myself on the back, but I don’t know of many other research firms that were pounding the table back in August (when the market was quiet) saying:
- The July rally in stocks was in trouble because global bond yields were moving higher (they did, and the S&P 500 is down 2% from the August highs), and
- That the Bank of Japan and ECB were more important to US stocks than the Fed (the ECB caused a pullback two weeks ago and the Bank of Japan may do so tomorrow).
So, now I’m reiterating that tomorrow is a potentially very important day for clients’ stock and bond holdings, because even if we don’t see a lot of volatility immediately following the meetings, the Bank of Japan decision may mean the continuation of this rally in global bond yields, and the decline in stocks.
And, that could have significant consequences on clients returns as we enter the fourth quarter.
We are committed to making sure our paid subscribers know, before their competition, whether the Bank of Japan will cause global bond yields to move higher or lower, because that will be the key to getting clients properly positioned to outperform in Q4.
We’ve already delivered our Plain-English BOJ Preview to paid subscribers and they already know:
- What The Market Expects from the BOJ
- What will Make the Meeting “Dovish” and the likely market response
- What will Make the Meeting “Hawkish” and the likely market response
So, tomorrow, while other advisors and investors are searching WSJ.com, MarketWatch or CNBC to try and determine whether the meetings were bullish or bearish for stocks and bonds, our subscribers will already know.
But, more importantly, our subscribers know that at 7 a.m. Thursday morning we will deliver clear, Plain-English analysis of what the meetings mean for all asset classes (Stocks, Bonds, Commodities, Currencies) in the short and long term, and what tactical ETFs or general allocations we think will outperform in Q4 and beyond (and if that means raising cash, we’ll say it!).
Our paid subscribers won’t have to wait for a delayed, compliance-approved recap from their brokerage firm that just explains what the BOJ or Fed did, and ignores how to either protect gains or profit from the decisions.
We are going to tell our subscribers (at 7 a.m., and in plain English): 1) What Happened, 2) What it Means for Client Holdings (Stocks, Bonds, OI, Gold, the Dollar) and 3) How We Think We Can Make Money from It.
And, because this is such an important time for markets, we will be hosting a special webinar this Thursday at 1 P.M. EDT titled: “Breakout or Breakdown? 4th Quarter Market Preview.”
We will discuss the outlook for both stocks and bonds (and how we think investors should be positioned) heading into the 4th quarter.
There are a lot of moving pieces to tomorrow’s BOJ meeting and there aren’t a lot of clear, easy-to-read previews out there, so I’ve included an excerpt of our BOJ Preview as a courtesy:
BOJ Preview: What’s Expected
The fear going into tomorrow’s meeting will be that the BOJ will tacitly admit that it is indeed out of bullets, and is no longer able to provide meaningful stimulus to the Japanese economy. And while Japan is a unique case, this matters to all developed stock markets for two reasons.
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First, and most directly, if the BOJ raises a symbolic white flag tomorrow, Japanese Government Bond yields will keep rising, which will make US Treasury yields rise, and that will keep a headwind on stocks.
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Second, global stock markets have been supported (or propped up, depending on your definition) by the idea of ever more accommodative central banks. If the most aggressive central bank just declared itself impotent to spur further growth or inflation, what does that say about the ability of other central banks to support stocks prices/the economy if we see a slowdown? I often say at its heart, the market is little more than a confidence indicator, and a BOJ that disappoints markets again will strike a big blow to market confidence.
Bottom line, for global stock and bond markets that have been driven higher by the expectation of forever-low rates and ever-increasing central bank stimulus, having the most active player tacitly admit defeat is not good.
Now that we have the context, let’s look at what’s expected (there are a lot of moving pieces here, so bear with me):
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QE: The first thing I will look at when I get up Wednesday will be to see if the BOJ increased the amount of QE. What’s Expected: No change to QE. If there is no change to QE, this BOJ decision will be at best neutral for stocks.
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Dovish If (and Likely Market Reaction): Restricted for Subscribers
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Hawkish If (and Likely Market Reaction): Restricted for Subscribers
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Interest Rates:
What’s Expected: Deposit Rate Cut from -.1% to -.3%.
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Dovish If (and Likely Market Reaction): Restricted for Subscribers
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Hawkish If (and Likely Market Reaction): Restricted for Subscribers
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Wildcard to Watch: If the BOJ increases the inflation target from 2% to 3% (or close to 3%) that will be a surprise dovish move, and be taken as an unexpected positive (positive for stocks, negative for global bond yields).
Have a Plan In Place If Yields Keep Rising (and Stocks Keep Falling)
If you’re like me, and most advisors and investors, the biggest risk for tomorrow’s meetings is that global bond yields keep rising and stocks keep falling, creating an extension of the past 10 days where both stocks and bond holdings are falling together.
Given that risk, we spent last week providing subscribers with our “Higher Rate Playbook” they can refer to if we see that negative outcome, because in that scenario protecting profits and finding sectors that can outperform will be critically important! Paid subscribers already have this tactical playbook they can refer to, because we all know thinking clearly gets much more difficult when markets are falling!
Play #1: Get Short the Long End of the Yield Curve, and/or Reduce the Overall Duration in any Bond Ladders
If we see a sustained decline in bonds/rally in yields, the belly and long end of the yield curve will get hit much harder than the short end of the yield curve.
There are two reasons for this:
First, the long end (say beyond 10 years) is over inflated because of foreign money, and as such has a lot further to fall before we get to compelling values.
Second, the short end of the curve (really 2 years or less) trades off Fed expectations, and the Fed simply isn’t going to raise rates quickly regardless of what happens in the markets (and especially if we see a selloff in stocks). So, the Fed will anchor the short end of the yield curve while the longer end rises, meaning the declines in short-term bonds will be less than in longer-term bonds.
ETFs to Get “Short” the Long Bond (there are many ETFs to do this but this is a list of the most liquid and targeted): Restricted for Subscribers
What to Buy in the Bond Markets: Restricted for Subscribers.
We don’t think everything in the bond market is toxic and we continue to have a top pick in the fixed income market for incremental capital that is less than five-year duration and the best alternative in a bond market that may be broadly declining.
Play #2: Focus on Good (but not Great) Credit Quality in Corporates
First, I think there may be opportunities for additional yield in the tier right below the top end of investment grade.
Point being, I would take the extra yield in that space between AAAs and junk, because barring a broad economic slowdown, corporate balance sheets are as strong as they’ve been in years.
Second, if I had a large allocation to junk bonds, I would rotate into higher-quality corporates because junk will get hit, and hit hard, in a declining bond market (think of junk bonds as the “subprime” of the bond market). Yes, junk pays a good yield, but in a rising rate environment it’s not worth the incremental risk.
How to Get Short Junk Bonds: Restricted for Subscribers.
How to Put on a Long Investment Grade/Short Junk Spread:
Restricted for Subscribers.
Play 3: Shift Exposure in US Stocks Out of “Yield Proxy Sectors.” (Know the difference between high-yielding sectors and truly defensive sectors).
If bonds and stocks keep falling, sector selection is going to become very important, and knowing the difference between truly “defensive” sectors vs. sectors that pay big dividends will matter for performance.
We provided the specific defensive sectors we like to paid subscribers in a report last week.
Play 4: Get a General Hedge Against “Risk Off.”
For over a year now we’ve used a specific inverse ETF as a broad hedge against a “risk-off” move in stocks, as this ETF has direct, specific exposure to some of the weakest sectors of the market, and as such can cushion any broad declines in the markets (like we saw in August/December 2015 and in January/February 2016).
We provided this specific ETF to subscribers once again in a report last week.
To be clear, I’m not advocating taking any of these steps right now, as it’s simply not clear that the bond market has indeed turned. So, we have to be wary of (another) head fake in this multi-year bull market.
But, if the bond market does turn and 10-year Treasury yield moves towards 2%, it is important that advisors have a plan before the declines start, because things could get ugly quickly.
If you don’t have a morning report that is going to give you the plain-spoken, practical analysis that will help you navigate the BOJ and Fed decisions tomorrow, and help you get positioned properly to outperform into year end, then please consider a quarterly subscription to The Sevens Report.
There is no penalty to cancel, no long-term commitment, and it costs less per month than one client lunch!
With thousands of advisor subscribers from virtually every firm on Wall Street and a 90% initial retention rate, we are very confident we offer the best value in the private research market.
I am continuing to extend a special offer to new subscribers of our full, daily report that we call our “2-week grace period.”
If you subscribe to The Sevens Report today, and after the first two weeks you are not completely satisfied, we will refund your first quarterly payment, in full, no questions asked.
Click this link to begin your quarterly subscription today.
Value Add Research That Can Help You Finish 2016 Strong!
Our subscribers have told us how our focus on medium-term, tactical opportunities and risks has helped them outperform for clients and grow their businesses.
We continue to get strong feedback that our report is: Providing value, helping our clients outperform markets, and helping them build their books:
“Thanks for your continued insight; it has saved my clients over $2M USD this year… Keep up the great work!” – Top Producing FA from a National Brokerage Firm.
“Let me know if there is anything else that you need from us. Thanks again for everything. I really enjoy the Report – it is helping me grow my business and stay on top of things.”
– Independent FA.
“Great service from a great company!!” – FA from a National Brokerage Firm.
“Great report. You’ve become invaluable to me, thanks for everything…! – FA from a Boutique Investment Management Firm.
Subscriptions start at just $65 per month, billed quarterly, and with the option to cancel any time prior to the beginning of the next quarter, there’s simply no reason why you shouldn’t subscribe to The Sevens Report right now.
Begin your subscription to The Sevens Report right now by clicking this link and being redirected to our secure order form.
Finally, everything in business is a trade-off between capital and returns.
So, if you commit to an annual subscription, you get one month free, a savings of $65. To sign up for an annual subscription simply click here.
Best,
Tom
Tom Essaye
Editor, The Sevens Report
Higher Rate Playbook
Eight years ago today, Lehman Brothers declared bankruptcy and, in my opinion, this business hasn’t been the same since.
That event, and the subsequent fallout, forever changed the way I analyze and invest in the markets, and I bet that’s true for you and your clients as well.
For me, the biggest change pre-Lehman to post-Lehman was the realization that the worst-case scenario can happen, so you can’t be dismissive of it regardless of how low the probability.
That’s one of the reasons that I produce The Sevens Report
– because I want to make sure our subscribers have someone watching their back and looking for risks to client portfolios across asset classes.
And, that’s sometimes why some people think I’m bearish.
I’m not bearish, but one of my main jobs is to make sure that my subscribers aren’t blindsided by seemingly obscure macro risks (like the ECB or BOJ).
That’s also why we spend hours each day watching stocks, bonds, commodities, currencies and economic data so that we can tell our subscribers when risks are materializing, and so we can suggest strategies to protect client portfolios and profit from market conditions.
And, that’s why three weeks ago we told subscribers not to be fooled by a quiet market, and alerted them to the fact that there were critical central bank events looming in September.
So far, we’ve been right:
- Fed Jackson Hole Conference August 26th: Will Yellen be “dovish” in her speech? Result: Bearish. Yellen was dovish, but Fed Vice Chair Fischer was “hawkish” and put a September rate hike on the table, causing a drop in stocks.
- The ECB Meeting September 8th: Will the ECB hint at more stimulus (bullish) or not (bearish)? Result: Bearish. The ECB did not hint at more stimulus and that has contributed to this pullback in stocks.
- The Fed Meeting September 21st: Will the Fed hike rates (very bearish), hint at hiking rates in December (bearish) or stay ultra-dovish (bullish)?
- The Bank of Japan Meeting September 21st: Will the BOJ adopt “Helicopter Money Light” (bullish), or just do another inconsequential easing like in July (bearish).
You know by now that next week’s meetings are key because if the Bank of Japan disappoints markets and the Fed is “hawkish,” bond yields will keep rising and stocks will keep falling.
But, just knowing that isn’t enough.
Advisors needs to have a plan in place to protect client portfolios if the selling gets worse.
That’s why earlier this morning we included, in the regular daily Sevens Report, a “higher rate” playbook of ETFs that will protect client portfolios if the decline in bonds and stocks continues or accelerates.
So, not only have we given our paid subscribers:
1) The information and talking points that show clients and prospects they understand the markets and weren’t surprised by the volatility, but also
2) A specific, tactical plan to protect client portfolios and maintain performance, should these events cause a significant pullback in stocks and bonds.
That’s how we make The Sevens Report
more than just a daily research report, and instead make it a tool that advisors use to get more assets and grow AUM.
Understanding how to be positioned should we see a continued decline in both stocks and bonds is critically important if an advisor or investor wants to successfully navigate these markets in the fourth quarter, and I’ve included an excerpt of that research below as a courtesy.
Higher Rate Playbook Part 1 (Sevens Report Excerpt)
Let me be perfectly clear: The major risk I see to portfolios right now is that we see a continuation of last week – namely both stocks and bonds decline together.
Given that, I want to lay out a general “playbook” of what to do if we do see bonds breakdown materially (which likely will drag stocks down).
Now, to be clear, I’m not saying execute on this today. But I do want to produce a list of ETFs and strategies that everyone can refer back to should we see bonds drop further.
Play #1: Get Short the Long End of the Yield Curve, and/or Reduce the Overall Duration in any Bond Ladders
If we see a sustained decline in bonds/rally in yields, the belly and long end of the yield curve will get hit much harder than the short end of the yield curve.
There are two reasons for this:
First, the long end (say beyond 10 years) is over inflated because of foreign money, and as such has a lot further to fall before we get to compelling values.
Second, the short end of the curve (really 2 years or less) trades off Fed expectations, and the Fed simply isn’t going to raise rates quickly regardless of what happens in the markets (and especially if we see a selloff in stocks). So, the Fed will anchor the short end of the yield curve while the longer end rises, meaning the declines in short-term bonds will be less than in longer-term bonds.
ETFs to Get “Short” the Long Bond (there are many ETFs to do this but this is a list of the most liquid and targeted): Restricted for Subscribers
What to Buy in the Bond Markets: We don’t think everything in the bond market is toxic and we continue to have a top pick in the fixed income market for incremental capital that is less than 5-year duration and the best alternative in a bond market that may be broadly declining.
Play #2: Focus on Good (but not Great) Credit Quality in Corporates
On the corporate side, there will be broad pressure on all corporate bonds if Treasuries decline, but that doesn’t mean there won’t be attractive yields in certain corners of the corporate bond market.
Money will likely initially rotate into very high-quality corporates as it exits Treasuries, so we could see yields in AAA bonds fall and become unattractive. But I think there may be opportunities for additional yield in the tier right below the top end of investment grade.
Point being, I would take the extra yield in that space between AAAs and junk, because barring a broad economic slowdown, corporate balance sheets are as strong as they’ve been in years.
That said, I would not reach for yield into the junk market.
In fact, if I had a large allocation to junk bonds, I would rotate into higher-quality corporates because junk will get hit, and hit hard, in a declining bond market (think of junk bonds as the “subprime” of the bond market). Yes, junk pays a good yield, but in a rising rate environment it’s not worth the incremental risk.
How to Get Short Junk Bonds:
Restricted for Subscribers.
How to Put on a Long Investment Grade/Short Junk Spread:
Restricted for Subscribers.
Play 3: Shift Exposure in US Stocks Out of “Yield Proxy Sectors.” (Know the difference between high-yielding sectors and truly defensive sectors).
Included in tomorrow’s paid edition of The Sevens Report.
If bonds and stocks keep falling, sector selection is going to become very important, and knowing the difference between truly “defensive” sectors vs. sectors that pay big dividends will matter for performance.
We will detail the specific defensive sectors we like in tomorrow’s report.
Play 4: Get a General Hedge Against “Risk Off.”
Included in tomorrow’s paid edition of The Sevens Report.
For over a year now we’ve used a specific inverse ETF as a broad hedge against a “risk off” move in stocks, as this ETF has direct, specific exposure to some of the weakest sectors of the market, and as such can cushion any broad declines in the markets (like we saw in August/December 2015 and in January/February 2016).
To be clear, I’m not advocating taking any of these steps right now, as it’s simply not clear that the bond market has indeed turned. So, we have to be wary of (another) head fake in this multi-year bull market.
But, if the bond market does turn and 10-year Treasury yield moves towards 2%, it is important that advisors have a plan before the declines start, because things could get ugly quickly.
Increased Market Volatility Will Be an Opportunity for the Informed Advisor and Investor
We aren’t market bears, but we said consistently that things were going to be volatile in 2016, and we were right!
And, as we approach the biggest event for markets since Brexit (the BOJ meeting next Wednesday) the advisor who is able to confidently and directly tell their nervous clients what’s happening with the markets and why stocks are up or down, and what the outlook is beyond the near term (without having to call them back), will be able to retain more clients and close more prospects.
We view volatility as a prime opportunity to help our paid subscribers grow their books and outperform markets
by making sure that every trading day they know:
1) What’s driving markets
2) What it means for all asset classes, and
3) What to do with client portfolios.
We monitor just about every market on the globe, break down complex topics, tell you what you need to know, and give you ETFs and single stocks that can both outperform the market and protect client portfolios.
All for $65/month with no long term commitment.
I’m not pointing this out because I’m implying we get everything right.
But we have gotten the market right so far in 2016, and it has helped our subscribers outperform their competition and strengthen their relationships with their clients – because we all know the recent volatility has resulted in some nervous client calls.
Our subscribers were able to confidently tell their clients 1) Why the market was selling off, 2) That they had a plan to hedge if things got materially worse and 3) That they were on top of the situation.
That’s our job, each and every trading day, and we are good at it. We watch all asset classes to generate clues and insight into the near-term direction of the markets, but our most important job is to remain vigilant to the next decline.
While we spend a lot of time trying to identify what’s really driving markets so our clients can be properly positioned, we also spend a lot of time identifying tactical, macro-based, fundamental opportunities that can help our clients outperform.
If you want research that comes with no long-term commitment, yet provides independent, value added, plain English analysis of complex macro topics, click the button below to begin your subscription today.
Finally, everything in business is a trade-off between capital and returns.
So, if you commit to an annual subscription, you get one month free, a savings of $65. To sign up for an annual subscription simply click here.
Best,
Tom
Tom Essaye
Editor, The Sevens Report
Bond Bubble
Something potentially very important just happened with the 10-year Treasury yield.
It broke a downtrend in place since the start of 2016, and if it can hold this breakout through the Bank of Japan and Fed meeting next week, it will be a strong signal that the bond bull market may be ending, and interest rates may be (finally) moving higher.
I’m under no illusions that bonds aren’t exactly the most exciting topic in the markets, but the reason we keep focusing on the action in the bond markets is because what bond yields do from here will
be critically important for how stocks and bonds perform in Q4.
Stocks have pulled back a bit recently as bond yields have risen, but the potential is still there for either a continued melt up (at which point advisors are going to want to be very long) or a potentially violent pullback in both stocks and bonds (at which point advisors are going to want to be very defensive).
So, with the BOJ and Fed meeting looming next week and the first presidential debate the week after that, the rest of September will be an especially critical time if you are an advisor or investor who has underperformed markets so far in 2016 (and there are a lot of very good advisors who have underperformed this difficult market), as these events will present an opportunity to close that performance gap… if you know what’s happening and how to be positioned.
And, we’ve seen that over the past few weeks. Banks and other “higher-rate sensitive” sectors have massively outperformed, while tech and higher beta allocations have lagged, rewarding cautious advisors and investors who didn’t chase markets higher in late July/August.
We are going to be very focused on making sure our paid subscribers know, immediately, what the implications are for each of these key events,
and which sectors will benefit from those events, whether it’s banks, consumer staples, utilities, tech or inverse ETFs.
In tomorrow’s edition of The Sevens Report
we are going to be providing a “Higher Rate Playbook” for paid subscribers that details (with specific ETFs):
1) How to hedge a higher interest rate driven decline in stocks,
2) Which market sectors will outperform in a higher rate environment, and
3) What parts of the bond market will outperform and underperform in a rising rate environment.
Look, it’s been a very tough year to beat lazy indexing, but we recognize the chance to make up ground over the coming weeks, and into Q4 and we’re going to be focused on helping our advisor subscribers do just that by making sure they have the need-to-know analysis of all asset classes and global regions, not just US economics or the Fed.
We’re approaching the one-year anniversary of the August 2015 collapse in stocks, and while markets are higher (finally), so is volatility, as international events exert greater influence over the Fed, the US economy, and the US stock market.
We understand that in this market, clients’ assets are at the mercy of the BOJ, ECB, Italian banks, Chinese policy makers, etc., and that’s why, every day, we make sure our paid subscribers know the key trends in:
- Stocks
- Bonds
- Commodities
- Currencies
- Economic data
It’s only by providing that 360-degree coverage, every day, that advisors and investors can truly have an understanding of the risks and opportunities for their portfolios in this environment.
The end of the bond bull market has been called many times by analysts over the past several years, and while I’m not about to do that today (the benefit of the doubt remains with the bulls) there is a subtle but important change in the markets that may signal the lows in Treasury yields are in for a long, long time.
Another Nail in the Bond Bubble Coffin?
Hopefully by now we’ve driven home the point that next week’s BOJ meeting is the most important event on the calendar since Brexit, because if the BOJ disappoints markets it’ll send Japanese bond yields higher, which will pull Treasury yields higher and hurt stocks.
But, even if the BOJ chooses to do more stimulus, we still may have seen the lows in global bond yields for a very long time.
The reason?
Currency hedging (and Las Vegas).
Longer-term readers know that foreign buying of Treasuries has been a massively positive influence on Treasury prices/negative influence on yields.
One of the reasons foreign buyers have gobbled up Treasuries over the past several years was because it was very easy and cheap to hedge out the currency exposure (a German portfolio manager who bought Treasuries was also buying dollars, and that represented an additional risk he or she would want to hedge out, so it became a pure yield play).
But too much of a good thing can become a problem, and in this case the ocean of foreign money flowing into Treasuries, all looking for the same currency hedge, has caused a problem.
For those who follow sports, it’s the same problem bookies have each week when betting the spreads.
In Las Vegas, when too much money goes towards one team, bookies have to adjust the point spread to make a bet on the other team more attractive.
That’s why betting spreads move during the week, as the bookies are always trying to make the amount bet on Team A equal to the amount bet on Team B. That way the bookies have no risk and just collect fees. It’s similar with currency dealers and trading desks.
To bring it back to the markets, if everyone wanted to hedge out the risk of the euro or yen strengthening vs. their Treasury positions, the bets become too one sided and the currency dealers and trading desks have to increase their fees to insulate themselves against losses.
That has been occurring in the foreign exchange markets over the past several months, and at this point, according to reports from Deutsche Bank and Reuters (and I’ve read similar articles from other firms), it now costs so much to hedge out that foreign exchange risk that it has totally offset the additional yield you get in Treasuries over other government debt.
Basically, the “Long Treasuries” trade has become too crowded, and isn’t worth it anymore.
That’s important for advisors and their clients for one simple reason:
It means that a major source of demand for Treasuries has been diminished, which is Treasury negative regardless of what the Fed or BOJ does next week.
Have a Plan in Place if Stocks and Bonds Drop
Let me be clear: If the BOJ disappoints markets next week, both stocks and bonds will drop. But, even if the BOJ does unleash more stimulus, depending on what happens with global bond yields, we still could see Treasury yields rise (or at least not fall very much).
We are committed to making sure our paid subscribers have a strategy to protect client portfolios in either environment, and that’s why tomorrow, we are going to be providing a “Higher Rate Playbook” for them that details (with specific ETFs):
1) How to hedge a higher interest rate driven decline in stocks,
2) Which market sectors will outperform in a higher rate environment, and
3) What parts of the bond market will outperform and underperform in a rising rate environment.
If all we do is help you navigate the next six weeks correctly and help you get properly positioned in client accounts for the fourth quarter, we will have more than covered our subscription cost.
If you don’t have a morning report that is going to give you the plain-spoken, practical analysis that will help you navigate the coming weeks and help you get positioned properly to outperform into year end, then please consider a quarterly subscription to The Sevens Report.
There is no penalty to cancel, no long-term commitment, and it costs less per month than one client lunch!
With thousands of advisor subscribers from virtually every firm on Wall Street and a 90% initial retention rate, we are very confident we offer the best value in the private research market.
I am continuing to extend a special offer to new subscribers of our full, daily report that we call our “2-week grace period.”
If you subscribe to The Sevens Report today, and after the first two weeks you are not completely satisfied, we will refund your first quarterly payment, in full, no questions asked.
Click this link to begin your quarterly subscription today.
Value Add Research That Can Help You Finish 2016 Strong!
Our subscribers have told us how our focus on medium-term, tactical opportunities and risks has helped them outperform for clients and grow their businesses.
We continue to get strong feedback that our report is: Providing value, helping our clients outperform markets, and helping them build their books:
“Thanks for your continued insight; it has saved my clients over $2M USD this year… Keep up the great work!” – Top Producing FA from a National Brokerage Firm.
“Let me know if there is anything else that you need from us. Thanks again for everything. I really enjoy the Report – it is helping me grow my business and stay on top of things.”
– Independent FA.
“Great service from a great company!!” – FA from a National Brokerage Firm.
“Great report. You’ve become invaluable to me, thanks for everything…! – FA from a Boutique Investment Management Firm.
Subscriptions start at just $65 per month, billed quarterly, and with the option to cancel any time prior to the beginning of the next quarter, there’s simply no reason why you shouldn’t subscribe to The Sevens Report right now.
Begin your subscription to The Sevens Report right now by clicking this link and being redirected to our secure order form.
Finally, everything in business is a trade-off between capital and returns.
So, if you commit to an annual subscription, you get one month free, a savings of $65. To sign up for an annual subscription simply click here.
Best,
Tom
Tom Essaye
Editor, The Sevens Report
What is a Dovish Hike?
One of the most enjoyable parts of my morning routine is reading about the history of each day, because doing this task daily shows you that indeed, history doesn’t necessarily repeat, but it does rhyme—and that was true again this morning.
Since Friday, stocks have been under modest pressure
as expectations for a 2016 rate hike go up, but the selloffs have been mostly contained, because at the Jackson Hole Fed conference last week Fed Chair Yellen declared that regardless of when the Fed hikes rates, overall interest rates will remain historically low for many, many years.
Well, today’s date in history offers a pointed example (one that was much more important than monetary policy) that the best of intentions sometimes simply can’t be fulfilled.
On this day in 1935, then President Franklin D. Roosevelt signed Senate Joint Resolution 173, better known as the “Neutrality Act.”
It was a well thought out, well supported law that showed clearly the US had no intention of entering into any potential war in Europe. It was the right thing to do at the time and the intentions were clear.
And, we all know what happened a few years later.
My point?
You can have a carefully crafted set of polices built on the best of intentions, but a lot can change in just a few months.
The reason this event in history caught my attention is because over the past several days, in the wake of Fed Vice Chair Stan Fischer’s “hawkish” comments Friday and yesterday, the bulls started to downplay any potential negative influence of a rate hike because it’ll be what they call a “Dovish Hike,” or, a single rate hike followed by no hikes for a very, very long time. As such, the rate hike itself won’t be bearish for stocks.
Maybe that’s true, but the fact of the matter is the Fed has a very bad record of long-term forecasting (more on that below), so as the “Dovish Hike” scenario grows in popularity as a justification to buy stocks regardless of what the Fed does, I want to make sure that investors and advisors know:
1) What a “Dovish Hike” is,
2) What a “Dovish Hike” means for stocks, and
3) Why We Don’t Think a “Dovish Hike” Is a Reason to Buy Stocks
I know the long weekend is approaching and the last thing anyone wants to do is try and game the near-term path of interest rates, but the fact of the matter is we are approaching a tipping point in the bond market, and how it goes will have significant consequences on investor’s portfolios… because if this bond market breaks down and bond yields move higher, that will cause both stocks and bonds to drop at the same time.
So, it’s critical that investors understand, at least generally, what issues are facing the bond market and that you are following an analyst who understands what will move the bond market and who is watching it every day, because with 6 potential market moving events looming over the next month, waiting for a generic, dated, perma-bull piece from your custodians CIO isn’t going to cut it… not with a bond and stock market that are both still very extended.
We’ve included an excerpt of recent bond research for you below. Full, paid subscribers to The Sevens Report
received this information earlier this week along with specific tactical ETF suggestions to navigate the current environment.
What Is A “Dovish Hike?” (And Is It Good for Stocks?)
If the Fed is planning on executing a “Dovish Hike” it won’t be a medium- or longer-term headwind on stocks, but if it’s not a “Dovish Hike” and it’s the first of several, that will be an unanticipated headwind on stocks—so I want to make sure everyone is aware of what a “Dovish Hike” is, and why it’s not bearish short term, but at the same time also is not a reason to buy stocks.
What Is a Dovish Hike? A “Dovish Hike” is a clever title for a monetary policy strategy whereby the Fed raises Fed funds 25 basis points, but then explicitly says that the ceiling for the Fed funds rate is much, much lower than it was in the past (say 3% vs. previous 6%). So while the Fed is hiking rates, it can’t hike them very far given the economy.
What Does a “Dovish Hike” Mean for Stocks? Ostensibly, it’s positive beyond the short term. Yes, the idea that the Fed may raise rates sooner than later would be a potential short-term headwind. But beyond that, the idea that interest rates can’t return to pre-crisis levels is, supposedly, fundamentally dovish and it would help fuel a continued “low-rates-forever” rally. Assuming neither the BOJ nor ECB surprise markets hawkishly in September, a dovish hike in September would not mean that the rally cannot continue into the fourth quarter.
That Said, Is a Dovish Hike a Reason to Buy Stocks? No, We Don’t Think So (at least not for medium- or long-term investors). First, the Fed is no longer in control of longer-term interest rates, at least in the near term, so regardless of whether they keep Fed funds low over the next several years that likely won’t have that much effect on the direction of longer-term rates… and those rates are the key to the next move in stocks.
Second, the Fed’s longer-term forecasting ability is, frankly, terrible, so I’m hesitant to believe them when they say they know the new “long-term” ceiling for interest rates. As a reminder, in 2012, when the Fed first released the “dot” projections, many Fed officials had the Fed funds rate above 1% in 2014, and several had it above 2%… in 2014!
Point being, no one at the Fed knows what’s going to happen over the very longer term. They may believe that they’ll stay dovish for longer, but that simply may not be possible depending on a variety of factors, including what the ECB or BOJ do with policy, the global economy, inflation, etc. Bottom line, buying (or selling) stocks based on the Fed’s longer-term forecasts has not been the most successful investment strategy, and I don’t think this time will be different.
So, while the idea of a “Dovish Hike” could be a short-term catalyst for stocks, we do not see that as the catalyst for a real, sustained move higher unless it’s accompanied by very dovish actions by the BOJ or ECB. Until then, we will remain cautious and continue to contend that better economic growth is the key to a real, sustainable rally in stocks, not perma-low rates to compensate for anemic growth.
Bottom line, despite the media focus on a September or December hike, the more important issue with Fed policy is what they do after the next hike, as that will be a major factor in whether the S&P 500 can make significant gains from current levels.
What to Do Now: Tactical Allocation Ideas
The “Dovish Hike” scenario may not have a major influence on the broad markets initially, but it will have a continued influence on sector trading, specifically whether we see, finally, the start of a “Great Rotation” out of income-oriented sectors and into more cyclical sectors.
Several weeks ago we bought a regional bank ETF that we believed would help reduce any relative underperformance if we saw the start of a rotation out of safety and into cyclicals.
That decision has proven wise, because since then that ETF has rallied almost 9%, outperforming other cyclical sectors be nearly 5% and outperforming the S&P 500 by over 11% in just under two months!
If we do see a sooner-than-expected rate hike from the Fed, regardless of whether it’s a “Dovish Hike” or not, this ETF will continue to significantly outperform the S&P 500 and defensive, income-oriented sectors more generally, and we have continued to remind paid subscribers of this specific ETF.
We’re committed to making sure subscribers to our full morning report have the independent analysis they need to navigate macro risks while at the same time having the tactical idea generation that can help their clients outperform.
If your paid subscription research isn’t giving you talking points to discuss with clients, monitoring the macro horizon to keep you aware of risks, and providing tactical allocation suggestions and idea generation, then please consider a quarterly subscription to The Sevens Report.
If all we do is help you get one client, that will more than pay for the subscription!
I am continuing to extend a special offer to new subscribers of our full, daily report that we call our “2-week grace period.”
If you subscribe to The Sevens Report today, and after the first two weeks you are not completely satisfied, we will refund your first quarterly payment, in full, no questions asked.
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Increased Market Volatility Will Be an Opportunity for the Informed Advisor and Investor
We aren’t market bears, but we said consistently that things were going to be volatile in 2016, and we were right!
And, as we approach a series of 6 critical macro events, starting with Friday’s Jobs Report, the advisor who is able to confidently and directly tell their nervous clients what’s happening with the markets and why stocks are up or down, and what the outlook is beyond the near term (without having to call them back), will be able to retain more clients and close more prospects.
We view volatility as a prime opportunity to help our paying subscribers grow their books of business and outperform markets by making sure that every trading day they know:
1) What’s driving markets
2) What it means for all asset classes, and
3) What to do with client portfolios.
We monitor just about every market on the globe, break down complex topics, tell you what you need to know, and give you ETFs and single stocks that can both outperform the market and protect client portfolios.
All for $65/month with no long term commitment.
I’m not pointing this out because I’m implying we get everything right.
But we have gotten the market right so far in 2016, and it has helped our subscribers outperform their competition and strengthen their relationships with their clients – because we all know the recent volatility has resulted in some nervous client calls.
Our subscribers were able to confidently tell their clients 1) Why the market was selling off, 2) That they had a plan to hedge if things got materially worse and 3) That they were on top of the situation.
That’s our job, each and every trading day.
And, we are good at it.
We watch all asset classes to generate clues and insight into the near-term direction of the markets, but our most important job is to remain vigilant to the next decline.
While we spend a lot of time trying to identify what’s really driving markets so our clients can be properly positioned, we also spend a lot of time identifying tactical, macro-based, fundamental opportunities that can help our clients outperform.
If you want research that comes with no long-term commitment, yet provides independent, value added, plain English analysis of complex macro topics, click the button below to begin your subscription today.
Finally, everything in business is a trade-off between capital and returns.
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Best,
Tom
Tom Essaye
Editor, The Sevens Report
What Will Move Bond Markets
For the past two weeks, we’ve told you via these free excerpts that the markets were entering a critical six-week period that ultimately would decide whether the rally in stocks continues… or reverses.
Well, that six-week stretch of events started with a bang last Friday as Fed Vice Chair Fischer surprised markets by basically saying Friday’s jobs report would decide whether the Fed would hike rates in September.
As a result, bond yields spiked and stocks dropped.
And, if Friday was any indication, we’re in for a wild ride as the markets navigate the remaining 6 key critical central bank/macro events between now and September 26th (more on that below).
We never like to see the markets go down as all of us are generally “long” stocks, but Friday was a good day for us here at The Sevens Report, because it validated what we’ve been saying to our paid subscribers for the past several weeks:
Specifically, that whether stocks resume the July rally or break down from here will depend on the bond market, and as a rule, anything that sends bond yields up will be negative for stocks, and anything that sends bond yields down will be positive for stocks.
While other research publications were simply providing recaps of a dull market during the majority of August, we were consistently telling our subscribers that the bond market is the key and the coming several weeks were going to be critical—and on Friday afternoon (and continuing today), our advisor subscribers were able to demonstrate to their clients they were on top of markets and in control of their portfolios!
In fact, one subscriber wrote in and said it was the “Plain English” analysis of the bond market that’s helped him strengthen a relationship with a high net worth client, and he’s pretty sure that he’s going to get an additional allocation because, as the client said, his other advisors seemed to have “taken August off” given the quiet market.
That’s the kind of feedback that makes the early wake ups and long hours of work worth it, and the best part is that our subscriber only had to spend less than 10 minutes each morning reading our daily macro report. That’s how The Sevens Report
helps advisors grow their business.
Every trading day at 7 a.m. we provide plain English, concise analysis of:
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Stocks
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Bonds
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Commodities
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Currencies and
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Economic Data
And, our daily report takes less than 10 minutes to read each day!
Finally, we do it at a cost that’s substantially less than our competition (and less than one client lunch per month), and that’s why we continue to believe we offer the best value in the paid research space!
Given last Friday’s “hawkish” surprise from Fed Vice Chair Fischer, it’s critically important for all advisors to understand what is really driving the bond market
(it’s not a Fed rate hike) because where bonds go from here will determine the next move in stocks.
We’ve included an excerpt of that research as a courtesy.
Understanding What Will Move the Bond Markets (It’s Not Rate Hikes)
The question of when the Fed hikes rates has come back to the forefront for investors, as expectations for a rate hike in September or December have increased following the hawkish comments from last Friday.
But it is very important to understand that while the media will focus on the Fed hike drama, easily the most important thing to understand about the bond market right now is that the Fed has little to no control over whether 10- and 30-year Treasury yields stay in a downtrend (good for stocks), or reverse and start to trend higher (bad for stocks).
Whether the Fed hikes in September, December or 2017 won’t resolve the major issue facing stocks right now, which is the near-term direction of global 10- and 30-year bond yields.
Instead, there are two other central banks that control the direction longer-dated Treasury yields:
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The European Central Bank (ECB) and
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The Bank of Japan (BOJ)
For US stock and bond investors, what those banks do in September is much, much more important than what the Fed does between now and December.
Now, I said that the Fed doesn’t control longer-term interest rates anymore to a friend this weekend, and he was incensed that I could utter anything so “stupid.”
But, I pointed out that over the past two years, we’ve seen the Fed:
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End the QE program and
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Hike Fed funds 25 basis points
Yet, during that two-year period, yields on the 30-year Treasury are down 80 basis points, from 3.1% in December 2014 to 2.1% post Brexit, and yields on the 10-year Treasury are also down 100 basis points (or 1%), from 2.3% to 1.33% post Brexit.
CHART
So my question to him was: If the Fed is still in control of longer-term Treasury yields, how can this be possible?
The answer is they aren’t in control any longer as the Treasury market has been overrun by foreign buyers due to the actions of the BOJ, ECB and now BOE.
The reason this is important for advisors and their clients is this:
Between now and year end, whether stocks resume their rally will depend on whether the ECB and BOJ are more hawkish than expectations, not the Fed.
If that happens, yields on Bunds and JGBs (Japanese Government Bonds) will rise and that will cause Treasury yields to rise too, regardless of whether Yellen trots out with a dove on her shoulder and promises to never hike rates again!
The critical bottom line is this: The financial media will be totally consumed with whether the Fed is going to hike rates in September, but from a stock standpoint (specifically whether stocks rally in Q4 or pullback) what the ECB does on September 8th and what the BOJ does on September 21st are much, much more important.
They are in control of longer-dated Treasury yields, and longer-dated Treasury yields will decide the next move in stocks and we will make sure you stay focused on what’s really important in the bond markets over the coming six weeks.
Make Sure You Have the Plain English and Actionable Analysis to Navigate the Next Six Weeks
We will give our advisor and investor subscribers the plain English talking points to help them turn any Fed or central bank-based volatility into an opportunity to demonstrate their knowledge of markets and impress current clients and prospects.
And, we are going to provide that same level of analysis for the remaining 6 key events that are coming in September, events that will decide whether this rally extends into the fourth quarter
- Friday’s Jobs Report: Will the number increase the odds of a September rate hike (and if so cause more short term declines in stocks).
- The ECB Meeting September 8th: Will the ECB hint at more stimulus (bullish) or not (bearish)?
- The Fed Meeting September 21st: Will the Fed hike rates (very bearish), hint at hiking rates in December (bearish) or stay ultra-dovish (bullish)?
- The Bank of Japan Meeting September 21st: Will the BOJ adopt “Helicopter Money Light” (bullish), or just do another inconsequential easing like in July (bearish).
- First Presidential Debate September 26th: Will Trump get back into the race (bearish short term – and this is not a political opinion) or will Clinton maintain a comfortable lead (not bearish).
- International Energy Forum September 26th: Will OPEC and Non-OPEC members agree on a global production but (bullish oil) or not (very bearish oil).
If all we do is help you navigate the month of September correctly and help you get properly positioned in client accounts for the fourth quarter, we will have more than covered our subscription costs.
If you do not have a morning report that is going to give you the plain spoken, practical analysis that will help you navigate the coming six weeks, then please consider a quarterly subscription to
The Sevens Report.
There is no penalty to cancel, no long-term commitment, and it costs less per month than one client lunch!
With thousands of advisor subscribers from virtually every firm on Wall Street and a 90% initial retention rate, we are very confident we offer the best value in the private research market.
I am continuing to extend a special offer to new subscribers of our full, daily report that we call our “2-week grace period.”
If you subscribe to The Sevens Report today, and after the first two weeks you are not completely satisfied, we will refund your first quarterly payment, in full, no questions asked.
Click this link to begin your quarterly subscription today.
Value Add Research That Can Help You Grow Your Business in 2016
Our subscribers have told us how our focus on medium-term, tactical opportunities and risks has helped them outperform for clients and grow their businesses.
We continue to get strong feedback that our report is: Providing value, helping our clients outperform markets, and helping them build their books:
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Finally, everything in business is a trade-off between capital and returns.
So, if you commit to an annual subscription, you get one month free, a savings of $65. To sign up for an annual subscription simply click here.
Best,
Tom
Tom Essaye
Editor, The Sevens Report
Why the Yield Curve Matters to Your Clients
When you started in this business, did anyone sit you down and explain that watching things like the “10’s minus 2’s Spread” could help predict economic slowdowns and potentially avoid stock markets declines?
Me either.
I learned it the hard way – through being an execution trader and later a buy side portfolio manager through the mid – 2000’s, when in hindsight an inverted 10’s minus 2’s Spread provided a massive warning that a calamity was looming (the financial crisis).
Perhaps it’s just because of the scars from that period, but if you’re like me your blood pressure still goes up every time you hear “best” or “worst” since ‘07/’08.
So, my blood pressure is up considering I’ve heard it twice in the last week:
- Yesterday, the New Home Sales report posted the best number since January ’08.
- Last week, as we and others pointed out, the 10’s minus 2’s Spread fell to its lowest level since last ’07.
Our primary mandate here at The Sevens Report is to make sure our subscribers never get blindsided by a macro-economic event, so that second statement concerns me a lot more than the first excites me, at least from a portfolio management standpoint.
We alerted subscribers to the 10’s – 2’s spread dropping to near 9 year lows last Monday (two full days ahead of the WSJ), and you, via these free excerpts Wednesday.
And, over the past week, I’ve had several discussions about the curve with colleagues, some of whom agreed with me about my concern, and some of whom tried to convince me that it is indeed different this time and the flattening curve is not a problem.
Yield curve dynamics are not in advisor trading programs, and the media doesn’t make it clear why the curve is important. So, I want to cover that quickly:
Myself and others watch the yield curve because it’s generally speaking a good, broad predictor of future economic activity. And, below I explain what the shifting yield curve says about future economic growth.
We watch all markets (including the bond market and the yield curve) so we can alert subscribers to the rising chance of a pullback before it happens.
That’s why we produce this Report at 7 AM every trading day, so that our paid subscribers are never blindsidedby a macro-economic surprise.
To that point, stocks are strong again today but there isn’t a real “reason” for this two-day rally, and it reeks of short covering and chasing, just like the previous failed rallies of the last three weeks.
Meanwhile, looking at fundamentals, the macro horizon is again filling with potential bearish influences:
- Chinese economic data missed estimates in April and worries about the Chinese recovery are rising.
- Complacency towards the Fed is as high as I’ve ever seen as markets simply do not believe anything the Fed says with regard to rate hikes, and that means another “Taper Tantrum” is possible between now and July (chances of a June rate hike are just 38%).
- Politics will once again become a force on the markets as the Brexit vote nears and the US Presidential Election gets closer.
- US economic growth needs to accelerate and while there’s not a risk of a recession, the first data points from May (Empire State Manufacturing, Philly Fed and Richmond Fed) started with a “thud.”
Bottom line, despite the S&P 500 again challenging 2100, I think the next two months will be more difficult than the last two months, and it will be harder for advisors to keep up on the shifting influences on this market.
That’s why we’re going to make sure we do that for our paid subscribers, because the most important thing for financial advisors to do for the rest of 2016 is show clients that they: 1) Know what is going on in markets, 2) Are in control of client portfolios, and 3) Know what to expect next.
Because if you don’t, you could lose those clients to someone who does.
We make sure our paid subscribers have an independent analyst team that communicates with them daily at 7 AM and quickly identifies the risks and opportunities for:
- Stocks
- Bonds
- Currencies
- Commodities, and
- Interprets what economic data means for the market.
The Sevens Report is the daily market cheat sheet our paying subscribers use to keep up on markets, seize opportunities, avoid risks and get more assets.
With a monthly cost of less than one client lunch, we firmly believe we offer the best value in the independent research space.
Understanding the signals the bond market is sending is very important for anyone managing money for the longer term, so we wanted to directly explain what shifts in the yield curve mean for the economy and stocks.
Why The Yield Curve Matters to Your Clients
There are three movements the yield curve can make: Steepening, Flattening, and Inverting. Each gives a different implication for future economic growth:
A Steepening Yield Curve (where long-term yields rise more quickly than short-term yields) is generally representative of an economy that’s seeing growth accelerate. The reason (broadly speaking) is because in a good economy, capital tends to leave bonds and flow into more cyclical assets that offer more upside like stocks. So, investors sell longer-dated bonds because they don’t want to be stuck in a long-term, low-yielding asset compared to other alternatives. Put simply, people don’t want to settle for getting a low-but-stable yield.
A Flattening Yield Curve occurs when the bond market fears an economic slowdown, investors flood into bonds as protection, sending long-term bonds sharply higher and yields lower, which then flattens the yield curve (it’s the inverse of the previous scenario, as investors flock to the safety of stable-but-low yields).
An Inverted Yield Curve occurs when investors are becoming so concerned about future economic growth that they are piling into longer term Treasuries to guarantee a return of capital, not a return on capital, and the yield on the 10-year Treasury Drops below the yield on the 2-year Treasury.
So, as a guide:
Steepening Yield Curve: 10-year Yields Rise Faster than 2-Year Yields = Expected Economic Acceleration.
Flattening Yield Curve (which we’ve had recently): 10-year Yields Drop faster than 2-Year Yields = Looming Economic Slowdown.
Inverted Yield Curve: The 10-year yield is less than a 2-year yield = Looming Recession or worse.
The yield curve inverted during the ’06 – ’07 period and forecasted the looming financial crisis.
The yield curve is flattening substantially right now, despite the broad expectation of higher economic growth, and it’s making me and other analysts nervous about coming months and quarters.
Bottom line, the flattening yield curve had our attention because historically it signals an economic slowdown, and if there is a slowdown looming, than that’s obviously a big problem for stocks going forward.
Finally, with regards to timing, when the yield curve inverted in 2006, it took a while for the stock market to break (again these are slower moving indicators), but advisors who ignored that warning and remained in “Risk On” mode enjoyed modest short term gains, but suffered massive losses in ‘08/’09.
Meanwhile, advisors with longer time frames, who heeded that warning sign, didn’t miss much upside, and likely avoided 60% drop in the S&P 500 in ‘08/’09.
That’s why we watch these indicators for our subscribers!
It’s Different This Time (2007 Edition).
Finally, in reference to, “It’s different this time,” (the idea that this flattening yield curve isn’t signaling a looming slowdown) I had to dust off some of my old notebooks, but just as a reference, when the yield curve last flattened and inverted in ’06/’07, everyone said, “It’s different this time.”
Back then, the reason cited was the massive global yen carry trade, where hedge funds were selling Japanese government bonds (which had a 0% yield) and taking that capital and dumping it into Treasuries, on a massively leveraged basis. That, theoretically, pushed down longer-dated Treasury yields in the midst of a mild Fed tightening cycle and that caused the yield curve to invert, (although it’s important to remember back then the 2-year yield was over 4%).
That was the reason it was different that time, but we all know that in the end, it wasn’t different at all (in hindsight, the yield curve was screaming an alarm bell well before the financial crisis).
I’m in no way saying we’re going to see a repeat of that this time, but I don’t believe it’s different this time, and if this yield curve continues to flatten I’ll take that as a continued warning sign.
Our paid subscribers know that they can rest easy because we are watching all asset classes for them, and we will alert them when one of them (like the yield curve) flashes “Caution” like it is now, and when that “Caution” becomes a “Warning.”
If your brokerage or paid research isn’t providing you this type of analysis on a daily basis, please consider a quarterly subscription to The Sevens Report. The monthly cost is less than one client lunch, there is no penalty to cancel, and our retention rate is over 90%.
Value Add Research That Can Help You Grow Your Business in 2016 (Despite the Tough Start)
Our subscribers have told us how our focus on medium term, tactical opportunities and risks has helped them outperform for clients and grow their books of business.
We continue to get strong feedback that our report is: Providing value, Helping our clients outperform markets, and Helping them build their business:
“Tom’s ability to summarize market action in minutes is invaluable in today’s environment of data overload. We spend over $100,000 a year on research, and The 7:00’s Report is the one piece of research I can’t do without.” – John S., Vice President of a multi-billion-dollar asset management firm.
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“Great report. You’ve become invaluable to me, thanks for everything…! – FA from a Boutique Investment Management Firm.
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TomTom Essaye,
Editor of The 7:00’s Report
Important Shift in Yields
While everyone was focused on equities yesterday, I think the most important market movements we saw yesterday came from the 10 and 30 year treasuries.
It looks at though 10 and 30 year yields have finally, after months, broken out to the upside. As I’ve said repeatedly, getting long yields is going to be one of those “trades of a lifetime” but the trick is you’re got to be patient.
It looks to me like yields have finally broken out to the upside, and with the fundamentals of a less accommodative/more hawkish Fed, the technical and fundamentals are in line.
I’ve been faked out too many times on this trade so I’ll wait for another close or two before putting a position on, but it looks like the time is finally near to get long yields.
The above is an excerpt from the Sevens Report. To read the entire article and to receive daily commentary on all major markets and market moving economic and geo-political events, sign up today to request a free 2-week trial of the Sevens Report.