The Sky Isn’t Falling But Interest Rates Are. Here Are Suggestions On How To Respond

Highlights Interest rates are falling faster than a drunken tight-rope walker. There is considerable disagreement amongst market commentators and portfolio managers on how to respond. There are various ways to lower your vulnerability to a bear market. “The Sky is falling” is the catch phrase of Henny Penny (more commonly referred to as “Chicken Little” here in the U.S.), the lead character in a European folk tale of a chicken who goes on a quest to warn others that the world is coming to an end after getting hit in the head by an acorn.  The moral of the story:…

The Market Week in Review

The U.S. stock market finished the week lower as an inversion of the yield curve had investors flee to safer assets.  That said the yield on the 10-year treasury dropped from 1.73% last week to 1.55% today as investors buy-up the risk-free asset class.  Although the spread between the 10-year treasury and the 2-year treasury inverted mid-week, it actually finished the week at a wider, yet still very narrow, 0.07%.  The price of gold rose 0.92% to $1,524 an ounce which can also primarily be attributed to the inversion of the yield curve.  The price of crude oil rose a…

Scaling the Great Wall that Separates the U.S. and China

Highlights The Chinese-American Trade War is a biproduct of China’s rise as an economic world power. Neither side is likely to win a trade war. Chinese and American negotiators should set their sights on a bilateral, enforceable, rules-based trade pact that targets free and open trade and protects technological innovations and trade secrets. Historically, Chinese-American trade relations reflected the fact that China was a poor nation with an undeveloped economy, while the U.S. has historically been a rich nation with a developed economy.  As a result, America was willing to cut China some slack in trade deals, at least in…

The Market Week in Review

After a highly volatile week, the U.S. stock market finished largely downward as concerns of a currency and trade war between the U.S. and China intensified.  Interest rates also continued to drop as the 10-year treasury yield fell by 12 basis points to 1.73%.  Over the past two weeks the 10-year treasury yield has fallen from 2.08% to 1.73%.  Meanwhile the spread between the 10-year treasury yield and the 2-year treasury yield was little changed as it dropped from 0.17% to 0.16%.  The price of gold jumped nearly 4.0% to $1,510 an ounce as investors flee to the safe haven…

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