Weekly Economic Update: Rising Bond Yields

Presented by Nicholas Wealth Management

March 1st, 2021


Weekly Market Update

In this week’s recap: Rising bond yields deliver a blow to stocks; Fed Chair affirms commitment to current money policy.


The Week on Wall Street

Stocks dropped amid rising long-term bond yields, with sharp declines in high-valuation growth stocks leading the overall market lower.

The Dow Jones Industrial Average slipped 1.78%, while the Standard & Poor’s 500 declined 2.45%. The Nasdaq Composite index, home to many high-valuation growth plays, fell 4.92% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, edged up 0.37%.1,2,3


Rising Rates Derail Stocks

The 10-year Treasury yield climbed last week, from 1.34% to 1.42%, sending shudders through the stock market. While investors generally understand that economic strength may lead to higher bond yields, it was the speed at which bond yields rose that proved unsettling. Generally, when yields rise, bond prices tend to fall.4

Rising yields also drove sector rotation, with economic reopening stocks (e.g., energy, financials, and industrials) outperforming stay-at-home stocks, especially many of the big technology names.

The trend of higher yields was mitigated by testimony on Tuesday and Wednesday by Fed Chair Jerome Powell. He provided some assurances that the Fed remained committed to its current easy money policy stance.5

A surge in yields on Thursday, however, sparked a new wave of anxiety and a broad retreat that left market averages lower for the week. 


Powell Testimony Calms Investors

Concerns over rising long-term bond yields and inflationary pressures were eased by two days of testimony by Fed Chair Powell. Powell reiterated the Fed’s intention to stick with its near-zero short-term interest rate policy and monthly bond purchase program until the labor market fully recovers and its inflation goals are met.

Powell dismissed market fears of accelerating inflation, noting that he did not see inflation reaching any troubling levels, declaring that any increase would be modest and transitory. He added that the Fed would likely allow inflation to spend some time above its 2% target rate. Inflation for the past eight years straight has been below that target.5


Tip of the Week

If marriage gives you a new last name, be sure to notify Social Security, your bank, and the investment and insurance companies with whom you have accounts and policies about the name change.


Media

The Wall Street Journal has said $1 trillion of the stimulus has nothing to do with COVID-19. 10 million unemployed Americans could receive $100,000 EACH with $1 trillion. David Nicholas joined Maria Bartiromo on Fox Business Monday 3/1 to discuss the potential effects of the $1.9 trillion stimulus on the market!

Cryptocurrency exchange Coinbase has filed to go public. Charlie Munger blasted Bitcoin​ and many stocks are likely to benefit from the reopened economy. David Nicholas joined Charles Payne on Fox Business last Thursday 2/25 to share his thoughts.

Be sure to subscribe to our YouTube page for all of David’s media commentaries if you are unable to watch them live CLICK HERE!



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Investment advisory services offered through Bluepath Capital and Triumph Wealth Advisors. Nicholas Wealth, Bluepath Capital and Triumph Wealth Advisors are separate entities, and are not owned or controlled by WEG. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

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CITATIONS:

1. The Wall Street Journal, February 26, 2021

2. The Wall Street Journal, February 26, 2021

3. The Wall Street Journal, February 26, 2021

4. U.S. Department of the Treasury, February 26, 2021

5. The Wall Street Journal, February 24, 2021

David Nicholas

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