The recent increase in interest rates have already hit the mortgage refi market and higher rates look like it may be a headwind to the overall housing market in the first half of next year.
Recent inflation fears have helped lead to a sell off in bonds. From a total return perspective, the 30-year US treasury has declined by 13% and the 10-year US treasury has declined by 6% over the past 100-days.
Fun fact of the day: the ECB’s decision to extend its asset purchase program to the end of 2017, albeit at a slightly slower pace than the current €80B per month, puts it on track to surpass the Fed’s current $4.4B level of assets sometime around next August.
The high yield spread over the 10-year treasury has synced up to changes in breakeven inflation.
The 200-day correlation between US stocks and the MSCI World Index is currently 45%. This is the second lowest level since 2008. The only time the 200-day correlation was lower was in July 2014.
The aggregate market cap of our entire developed world index, GKCI DM, has remained mostly in the range of $35-40T over the last few years, after surpassing the $35T level (previously reached in 2007) in late 2013.
The recent backup in yields is happening at an unfortunate time. In nominal terms, debt held by the public is at an an all-time high (approximately $14.3 trillion).
The Sentix Euro Break Up Index is on the rise again, up to 24.08 in the latest monthly reading (as of 11/30/2016).
It has certainly been a good couple of weeks for financial stocks. But the good times still haven’t been good enough to bring bank stocks out of last place among 24 developed market industry groups.