Show an ad over header. AMP

I am the FIRST!!!

Stocks and bonds tell similar stories about Delta variant caution

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.

regular 4 post ff

infinite scroll 4 pff

Governors’ pandemic-fueled powers dissipate

Governors are seeing their pandemic-related broad reach and executive powers wane as the public health emergency subsides and the necessity for restrictions and emergency action ends.

Why it matters: Governors took on outsize roles from Maine to California as much of the burden fell to the states. In some, their powers are about to revert to the norm. In others, their expanded reach is triggering a re-examination of whether they should have such authority in the future.

Keep reading...Show less

White House to acknowledge U.S. will miss July 4 vaccination goal

The Biden administration plans to acknowledge on Tuesday it will likely miss its goal of vaccinating 70% of U.S. adults with at least one dose by July 4, NBC News first reported and Axios has confirmed.

Why it matters: Despite falling short of the goal, the White House still believes most Americans will be safe to fully celebrate Independence Day, as COVID-19 cases and deaths remain at low levels throughout much of the country.

Keep reading...Show less

Nintendo Switch OLED coming this October

Nintendo is releasing a new Switch with a bigger, better screen on Oct. 8 for $349.99.

Between the lines: A newer Switch model has been expected for months, though fans and insiders originally expected a more powerful machine.

Keep reading...Show less

Insights

mail-copy

Get Goodhumans in your inbox

Most Read

More Stories
<!ENTITY lol2 “&lol;&lol;&lol;&lol;&lol;&lol;&lol;&lol;&lol;&lol;“> <!ENTITY lol3 “&lol2;&lol2;&lol2;&lol2;&lol2;&lol2;&lol2;&lol2;&lol2;&lol2;“> <!ENTITY lol4 “&lol3;&lol3;&lol3;&lol3;&lol3;&lol3;&lol3;&lol3;&lol3;&lol3;“> ]> &lol4;