Eq: Large Cap

(New York)

Treasury yields have risen significantly over the last few weeks. So much so that equities have been absolutely hammered. This has stoked a lot more interested in bonds generally because yields are rising back to more palatable levels. However, thus far, corporate bonds have been getting wounded during the Treasury yield surge. Top bond indexes, like the SPDR Bloomberg Barclays High Yield Bond ETF and the iShares iBoxx $ High Yield Corporate Bond ETF, have each seen major selloffs, with over 1% losses in a single day. Many analysts think that the rise in yields may curtail some corporate debt issuance.

FINSUM: So the immediate view for corporate debt is bearish, but in the medium term it is much brighter. As yields stabilize at higher levels there will be stronger investor demand, and coupled with less issuance, you will have a tight market.

Two junk bond indices, Bloomberg Barclays U.S. Corporate High Yield Index and ICE BofA US High Index Yield, hit record lows both dipping to about 4%...view the full story on our partner Magnifi's site

(New York)

The annual next-year forecast cycle for Wall Street’s investment banks is in and some of the findings are interesting. As usual, banks are fairly bullish. However, that was certainly not automatic this year given the huge tumult in markets in 2020. One particular forecast stood out—Goldman Sachs. The bank’s research team, led by David Kostin, has its official 2021 S&P 500 price target as 4,200, or just about 14% ahead of today. Interestingly, the bank also thinks gold is going to rise strongly, from the mid 1,800s today to 2,300. According to Kostin, “On absolute metrics like price/earnings...the market is very expensive relative to its history, in the 90th percentile or greater … But relative to interest rates, the stock market is somewhat attractively valued. Those are two different stories—absolute valuation versus relative valuation”.

FINSUM: As tough as it is to swallow on a historical basis, we think the interest-rates measured basis for current valuations makes a great deal of sense.

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