Last week, the near-constant upward move in some equities since the end of March was abruptly broken. The previous gains by the tech and NASDAQ 100 high-fliers had been impressive, with many names up 100% in the past few months. While the market suffered a significant setback last week, it was still left above the levels from only a month ago. Given the extreme overbought condition of these names, and the retail speculation surrounding them, it was not surprising for a sharp pullback to occur without a clear catalyst.
Stock prices have run ahead of fundamentals, but that doesn’t mean the rally for equities has ended. For the next few weeks going into the election, I expect to see very choppy equity markets. For fixed income, the U.S. Treasury curve will most likely continue to steepen, with a cap on how high yields can go in the long end of the curve.
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