Bond Market Volatility Likely to Continue in 2016

Short and long-dated Treasuries have nearly identical returns this year, with Barclays indices showing 0.71% returns for 1-3 year Treasuries and 0.68% returns on the 20-year-plus index. Expectations that the Fed will make successive rate hikes may favor long-dated Treasuries, however. Rick Rieder of Blackrock says such successive increases “will benefit the long end (versus) the short end”, so “the long end is the better part of the curve.” He said gradual rate increases will benefit 30-year Treasuries and avoid a flood of supply that would depress prices. Nonetheless, Rieder said he is moderately bullish on short-dated Treasuries currently, while […]

Dollar Could Weaken Even As Fed Embarks on Rate Hiking Cycle

The rationale for predictions of continuing strength in the dollar are well-known but may be wrong, writes Ben Levisohn for Barron’s. Fundstrat strategist Thomas Lee looked at the last 11 tightening cycles (when the Fed began raising rates) and found that five involved “divergence” from European central banks (meaning that they were easing), which lasted a median of 17 months. During such times, according to Lee, the dollar has typically weakened a median 6.6% during the six months after such a Fed interest rate rise.  A weaker dollar could significantly benefit U.S. corporations that have suffered recently. Lee “estimates that […]

Low Rates Could Remain Stubbornly Low for Longer than Most Think

The Fed’s decision to raise short-term interest rates does not necessarily signal the beginning of a return to pre-2007 rates (averaging 7.3% from 1970-2007), writes Neil Irwin, Senior Economics Correspondent with the New York Times. Despite widespread predictions of sharply rising rates, Irwin notes that “interest rates historically are most closely tied to inflation.” Not only is the inflation rate currently very low, but most signs suggest it is likely to stay that way for some time. The Fed has been trying to increase inflation to a mere 2%, while Treasury bond prices “predict annual inflation in the United States […]

Low Rates Could Remain Stubbornly Low for Longer than Most Think

The Fed’s decision to raise short-term interest rates does not necessarily signal the beginning of a return to pre-2007 rates (averaging 7.3% from 1970-2007), writes Neil Irwin, Senior Economics Correspondent with the New York Times. Despite widespread predictions of sharply rising rates, Irwin notes that “interest rates historically are most closely tied to inflation.” Not only is the inflation rate currently very low, but most signs suggest it is likely to stay that way for some time. The Fed has been trying to increase inflation to a mere 2%, while Treasury bond prices “predict annual inflation in the United States […]

Cooperman Reiterates Positive Market Outlook. Says Oil in “Bottoming Zone”

Leon Cooperman of Omega Advisors lists a host of reasons why he remains optimistic about the market, telling CNBC that this bull market is not yet over. First on this list is that if a bear market were to begin today, it would be the first bull market to end without the Federal Reserve actually tightening interest rates. In the eight market cycles since the mid-1950s, stocks, on average, have gone on to produce gains for the 30 months after the first rate hike. The second point he makes is that bear markets take place in advance of a recession, and […]