Stocks and bonds tell similar stories about Delta variant caution
21 July 2021
Treasury yields have been falling, and yet stock prices remain near record highs. On the surface, this seems like conflicting attitudes toward risk. But a closer look at these markets reveals a much more consistent narrative.
Why it matters: Since March, long-term Treasury yields have been sliding, with the 10-year yield falling from 1.74% in late March to as low as 1.13% on Monday.
- Most market watchers agree this reflects an aversion to risk.
Driving the news: The spread of COVID variants has been troubling. And among other things, it risks disrupting economic growth.
- "I think we were pricing in the world going back to normal," Roberta Goss, co-head of the bank loan and CLO platform at Pretium, tells Axios. "But it's not 'normal.' It's not going to be normal for quite some time, and the path to normal is not linear."
Between the lines: While the major stock indexes are near record highs, the relative performance of certain categories of stocks reflects a shift toward more cautious positioning.
Flashback: In what's been dubbed the "reflation trade," traders bullish on the reopening of the economy had been showing a preference for stocks that are more sensitive to shorter-term bouts of growth — or cyclical growth.
- In this environment, small-cap stocks are preferred over large-cap stocks. Meanwhile, Big Tech stocks, which are defined by longer-term — or secular — growth fell out of favor.
What they’re saying: Capital Economics analyst Jonas Goltermann observed that for most of the second half of 2020 as Treasury yields were rising, the Russell 2000 index of U.S. small-cap stocks outperformed the large tech-heavy Nasdaq.
- This continued into spring 2021 until yields peaked and then turned lower — and the Russell 2000 started to lag the Nasdaq, a trend that’s lingered to this day.
The big picture: The major stock market indexes like the Dow and S&P 500 offer a limited view of what’s going on in the economy. Underlying these indexes are dozens of industries and thousands of companies that all have unique stories to tell.
The bottom line: Both the bond market and stock market reflect more cautious behavior by investors and traders.
Transcripts show George Floyd told police "I can't breathe" over 20 times
Section2Newly released transcripts of bodycam footage from the Minneapolis Police Department show that George Floyd told officers he could not breathe more than 20 times in the moments leading up to his death.
Why it matters: Floyd's killing sparked a national wave of Black Lives Matter protests and an ongoing reckoning over systemic racism in the United States. The transcripts "offer one the most thorough and dramatic accounts" before Floyd's death, The New York Times writes.
The state of play: The transcripts were released as former officer Thomas Lane seeks to have the charges that he aided in Floyd's death thrown out in court, per the Times. He is one of four officers who have been charged.
- The filings also include a 60-page transcript of an interview with Lane. He said he "felt maybe that something was going on" when asked if he believed that Floyd was having a medical emergency at the time.
What the transcripts say:
- Floyd told the officers he was claustrophobic as they tried to get him into the squad car.
- The transcripts also show Floyd saying, "Momma, I love you. Tell my kids I love them. I'm dead."
- Former officer Derek Chauvin, who had his knee on Floyd's neck for over eight minutes, told Floyd, "Then stop talking, stop yelling, it takes a heck of a lot of oxygen to talk."
Read the transcripts via DocumentCloud.