| Bonds Online |
 |
|
| 5/10/2013Market Performance |
| Municipal Bonds |
|---|
|
S&P National Bond Index
|
3.00% |
|
|
S&P California Bond Index
|
2.96% |
|
|
S&P New York Bond Index
|
3.13% |
|
|
S&P National 0-5 Year Municipal Bond Index
|
0.70% |
|
|
| S&P/BGCantor US Treasury Bond |
400.09 |
|
| More |
|
| Income Equities: |
|---|
| Preferred Stocks |
|---|
|
S&P U.S. Preferred Stock Index
|
848.03 |
|
|
S&P U.S. Preferred Stock Index (CAD)
|
636.26 |
|
|
S&P U.S. Preferred Stock Index (TR)
|
1,701.05 |
|
|
S&P U.S. Preferred Stock Index (TR) (CAD)
|
1,276.26 |
|
|
| REITs |
|---|
|
S&P REIT Index
|
174.07 |
|
|
S&P REIT Index (TR)
|
425.30 |
|
|
| MLPs |
|---|
|
S&P MLP Index
|
2,469.58 |
|
|
S&P MLP Index (TR)
|
5,428.50 |
|
|
See Data
|
|
|
|
 |
|
|
|
|
|
|
Fear Feeding Greed With S&P 500 Correlation to Bonds |
Bloomberg - June 28, 2010 - By Whitney Kisling and Elizabeth Stanton
(Updates today’s trading in fifth paragraph.)
U.S. stock prices are mirroring government bond yields more than ever, a signal to bulls that shares may be poised to rally.
The Standard & Poor’s 500 Index and 10-year Treasury rates posted a correlation coefficient of 0.8412 in the 60 trading days through June 16, showing stock prices and bond yields were the most linked in Bloomberg data going back to 1962. The last time the relationship was almost this strong during an economic expansion was at the beginning of the 2002 to 2007 bull market, when the benchmark gauge for U.S. equities doubled.
Rising correlations show investors are ignoring relative values among industries and assets and reacting to day-to-day signals on the economy, convinced Europe’s debt crisis will spur the second global contraction in three years. Invesco Ltd., Wells Capital Management Inc. and Chemung Canal Trust Co., who together manage $957 billion, say those concerns are overblown and shares will advance as the fastest profit growth since the mid-1990s restores confidence.
“When you add up the fundamentals, they’re there,” said Fritz Meyer, a Denver-based senior market strategist at Invesco, which oversees $580 billion. “The problem is this emotional aspect,” he said. “The historical truth in the stock market is you want to buy stocks when there’s skepticism and fear all over the place and sell when everyone’s feeling complacent.”
Deflation Threat
The S&P 500 rose 0.4 percent to 1,081.18 at 11:36 a.m. in New York, led by cigarette and telephone companies, after the Supreme Court rejected the Justice Department’s bid for as much as $280 billion in tobacco profits and Sprint Nextel Corp. turned on fourth-generation service in more markets.
The gauge lost 3.7 percent to 1,076.76 last week after new- home sales sank to a record low and the Federal Reserve signaled that European indebtedness may lead to a weaker U.S. economy. Deflation, or a general decline in prices, is possible within the next few years, Nobel Prize-winning economist Paul Krugman said at a June 22 conference in Tel Aviv.
When the S&P 500 dropped 3.9 percent on May 20 following higher-than-forecast U.S. jobless claims, yields on 10-year Treasuries plunged 0.156 percentage point. The stock index slid 3.4 percent and the rate on notes fell 0.162 point on June 4, after employment growth trailed economists’ estimates.
Commodity Prices
Equities are also moving in lockstep with each other and assets tied to economic growth. The correlation coefficient between the S&P 500 and the Thomson Reuters/Jefferies CRB Index of 19 raw materials has been above 0.5 since April 13 and climbed to 0.77 on May 14, the highest since at least 1956, data compiled by Bloomberg using 30 days of trading show. Almost 80 percent of swings in stocks within the S&P 500 are related to movements in the broader market, according to London-based Barclays Plc.
“Correlation is one of the great lessons of the whole crisis, and it hasn’t let its grip on the markets go,” said Barry Knapp, the New York-based head of U.S. equity strategy for Barclays. Knapp estimates the S&P 500 will climb 13 percent to end the year at 1,210. “Whatever the nature of the crisis, the one decision investors seem to make is whether they should be in risky assets or out.”
Linkages among markets are so high because investors are worried about a repeat of the 2008 credit crisis, which sent U.S. equities, commodities and real estate prices to their worst losses in half a century, Knapp said. The correlation level between the U.S. equity benchmark and 10-year Treasury yields averaged 0.5711 from October 2007 through March 2009, when the S&P 500 plunged 57 percent.
Home Sales
Reports on sales of new and previously owned homes last week showed that purchases reversed course in May after getting a bump higher from government stimulus programs including a buyer tax credit. About half of 106 U.S. forecasters in a study from Madison, New Jersey-based MacroMarkets LLC expect price declines in 2010 and half anticipate either little-changed or increasing values.
Congressional negotiators approved the most sweeping overhaul of U.S. financial regulation since the Great Depression on June 25. Financial companies in the S&P 500 rose 2.8 percent after the bill was announced as analysts said it won’t fundamentally reshape Wall Street’s biggest firms. The S&P 500 has lost 5.4 percent since President Barack Obama proposed banning proprietary trading by banks on Jan. 21.
‘Very Worried’
“Investors are very worried about which direction the global economy is going to take,” said Bart Zeldenrust, senior fund manager at Rotterdam-based Robeco Group, which oversees about $167 billion. “Correlation was very high during the financial crisis because there was only one bet that you could make in your portfolio: risk is on or risk is off. And it’s still very much so. It’s not a good sign.”
The lockstep moves are hurting strategies designed to smooth out fluctuations across equities, industries and assets. Standard deviation, a measure of the variation in returns, for mutual funds investing in the biggest U.S. companies that have an average value similar to the S&P 500 fell to 5.8 percent in the first quarter, based on data compiled by Lipper & Co. and Bloomberg. That’s the lowest level in three years.
“It’s been impossible for stock pickers lately,” Savita Subramanian, quantitative strategist at Bank of America Corp. in New York. “It’s been less about stock selection, less about fundamentals or company management, and it’s been all about macro.”
For the complete article [Business Week]
|
|
|
|
|
|
| Partner Market Place |
|
|
|
| Stuff to look at |
Yield and Income Newsletter: A must have for income investors. subscribe NOW
S&P Commentary and Newsletters: S&P
|
|
| BondsOnline Advisor |
Income Security Recommendation January 2013 Issue.
Keep up with monthly, in-depth coverage of fixed income market strategies, commentary, and insights as seen by our sources. Sign up for the free BondsOnline Advisor now!
Unsubscribe here [+] |
|
|
|
|
