Recoveries Don’t Die of Old Age

February 5, 2018

Recoveries Don’t Die of Old Age Photo

Congratulations to the Philadelphia Eagles on winning The Super Bowl! Last week stocks fell the most they have in two years – ending with a 666 point decline on Friday. It was the sixth-largest point decline in the Dow Jones Industrial Average’s history. At the same time stocks declined, Treasury yields climbed to the highest level in several years. The selloff in bonds unsettled equity investors that have seen a tremendous run up in prices over the last year – including an 8% rally to start 2018. Last week I wrote that the fundamental and technical factors are ideal to see yields increase and I don’t see those factors changing in the near term. Outgoing Federal Reserve Chair Janet Yellen recently mentioned the old adage, “economic recoveries don’t die of old age.” I continue to expect the economy to remain strong and rising yields will put pressure on stocks. I remain cautious on fixed income assets and expect stocks to be more volatile as they recalibrate to a higher rate environment.

Tags: Monday Morning O'Malley | Federal Reserve | Equity market | Treasury yields

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