Welcome to the extended version of the BAM Market Note. We are not bloggers by nature but have had clients and friends inquire about our thoughts on the market in between our newsletters. The number and content of posts will likely be determined by the conditions of the markets and the interests of our readers. We would greatly appreciate your feedback and comments.
Thursday, May 30, 2013
CHANGES IN MARKET CHARACTER
Over the last week or so, the markets have endured a mild correction. The jury is still out on whether or not it is over but it is indisputable that the nature of this recent weakness is very different from bouts of selling earlier this year. Generally speaking, in a market correction investors flee to the safety of treasury bills driving the rates on those instruments lower. However, over the last 4 weeks the 30 year treasury rate has actually increased 16% and the 10 year rate has increased over 28%. As a result, interest sensitive sectors have been hit much harder in recent weeks than the economically sensitive groups. Talk of the Federal Reserve tapering off their quantitative easing and entering into a more tightening monetary policy has led, in part, to the recent sell-off. Is the nature of the recent decline and the affected groups a sign of things to come? After all, quantitative easing cannot last forever... It is certainly worth watching and considering. As we have mentioned in our newsletter a number of times over the last year, many investors will be surprised that their "safe" allocation to bond funds is really not that safe in a rising rate environment.
Monday, May 27, 2013
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