According to louise yamada she says higher rates means a boost to equity prices that "The early stage of bull market can be accompanied by the initial rising rate cycle, It isn't until you get to about 5% that you start having problems" Early stage of a bull market??? Where has she been the last 7-8 years?? This is the longest bull market in our history and she thinks the initial start to rising rates begins another round of a bull market....so this entire time wallstreet has bitched about rising interest rates and how weak the economy is that it couldn't hold its own under rising interest rates is now all of the sudden bullish for equities... Well I'll be damned....just talk of a 1% interest rate environment would send wallstreet in a free fall...... http://www.cnbc.com/2016/11/17/200-years-of-us-interest-rates-on-one-chart.html
Kind of like Bollinger just before the tech bubble burst... 'splain'n why it was bullish that the A/D line was plunging as the market worked higher... "everyone is selling everything else and buying tech". Remember how bullish that was?
She is right. There is plenty of empirical evidence that shows that early in the "rate cycle" IS bullish for stocks. Not early in a bull market, but the rate cycle itself. The reason for this is because when rates start moving higher they are doing so because of inflationary pressures which IS a bull item for stocks. This means firms have pricing power in the market for the first time in a long time and this translates into higher earnings. Later in the rate cycle it becomes more bearish.
No one knows for sure where rates are headed, but now that Trump is president and plans on spending huge on infrastructure and is pro business everyone on wallstreet has this mentality that all of the sudden gdp is going to skyrocket and rates are going to have to rise to keep inflation steady....I'm laughing.....no one knows what's happening.....its all a guessing game...but funny to see how quick everyone has changed sides and is rooting for "change"....
A Republican Congress will NEVER approve a 1 Trillion Dollar spending package. Its all BS. Trump may keep his promises on immigration, the appointment of Sessions pretty much seals that deal, but his economic plan is gonna be dicey at best. There's a BIG correction coming.
Remember the $800B "shovel-ready jobs stimulus package to rebuild the infrastructure while putting unemployed Americans back to work" early in Odumbo's 1st term? How NONE of that money made its way to "shovel-ready jobs", but instead got spent to shore up union pension plans?
Looks like I'm seeing most of his promises not materializing ....... I want to see every single thing he mentioned and promised in his debates to become reality.... As for the Republican Congress approving that trillion dollar package you don't think it's going to happen? That would be huge NEGATIVE to trump as this is one promise he made over and over and over during his rise to President...if we see friction between a Republican President and Republican Congress we are in trouble!!
Bullish for commodity and emerging markets stocks, not S&P500 neither Nasdaq. Energy & materials are 10% of the S&P. 0% for the Nasdaq. Thas was another story during former economic cycles because commodity sectors could represent more than 30% of the index. CM