Well that was lovely!
So lets peel things back a bit and see what's going on. I had mentioned a few things in the last little while, expecting a seasonal pull back, well finally started, better late than never, I said rates are likely not going as low as the market thinks, good dose of that today, and I said not sure the Fed is going to cut quite as much as the market is pricing currently, another good dose of that today.
While it never feels good to get a big 'ole can of whopass opened on you, you'de be crazy to think its not going to happen. I had sold some winners awhile back and even though I re-initiated a position in Granite, I have maintained a fairly reasonable stock pile of cash awaiting the right opportunity. It was slightly tempting today but I think this downturn has legs yet, why, because I don't think rates have peaked in this short term.
So whats driving them higher? Well, a reacceleration in the U.S. economy appears to be happening and given that bonds were priced for recession not too long ago, this is what you get. There is also as I noted the other day, a belief Trump might actually win (egads), that being the case it is viewed his policies (does he actually have any) will be inflationary, tarriffs, huge debt, unfunded tax cuts. That being the case bond yeilds have to go higher, and as I also suggested earlier, expect low to mid 4's on the ten year. NOW, IF, there is a republican sweep, get your helmets on, maybe even a jock strap to be safe because you're going to take one somewhere you don't want to. Should republicans sweep, I think we go a pretty straight line to 5 on the ten year and reasonably good chance 5.25 to even 5.5 in time. Now that will have the potential to retest the lows we have rallied all the way back off. I would be selling winners fairly quickly if this happens.
Two rather large pieces to the puzzle looming ahead, October jobs and of course the election. I think we are in no mans land until both of these reveal themselves so I don't expect I'll be doing too much until then, of course I say that now.
On a final note, I'm arriving into the Big Smoke over the weekend and embarking on an epic tour. Catch up to you from my favorite little Roti stand soon. Good luck boys.
Stay good,
DZ