Bond yields continue to plunge and gold is soaring, reflecting the perfect storm of anxiety and a lot of unanswered questions.
Market mavens have been calling for the bond rally, which goes all the way back to 1981, to come to a crashing halt each year; that chorus continues to say it can’t go much lower. However, logic says that they’re right, but each session sees more records and with negative yields in Germany and Japan, there might be such a thing as a bottom.
Blue chip names, including Johnson & Johnson (JNJ), Church & Dwight (CHD), and Philip Morris (PMI) rallied higher as some investors stuck with blue-chip names in an effort to find safety. The flip side of this is the action in banks. Consider the Bank of England as it got the ball rolling…downhill Tuesday morning, announcing that it would loosen lending parameters to the tune of $200 billion to lend to individuals and businesses.
While I do worry about big multinational banks on both sides of the Atlantic, the action in regional banks was also a yellow flag on Tuesday.
- Zions -5.94%
- Fifth Third -4.19%
- Regions -4.07%
There was some buying into the close and this week still hinges on the jobs report out on Friday morning. I continue to think that the market is looking for good news and would treat it as good news. Right now that means job creation north of 180,000, maybe north of 200,000, which seems like a tall order considering results from the May report.
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The fact that lower interest rates aren’t moving the needle is good news. The fact that the market needs good news after lying to itself or learning to admire, even applauding mediocrity is the bad news. We are not extraordinarily overbought, but the market needs a sign for a real catalyst. Meanwhile, I won’t be the one to predict the bond top, but I think some air wants to come out of that balloon.
Moreover, if it happens in an orderly manner, we could see that long-awaited migration into stocks beyond 100 year old blue chip names.
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