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What is the signal from the 10-year T-note yield sliding to a near three-month low of 4.02%?
Key Takeaways
Erratic Stock Market Now Lower Than Late November: If one thing is clear, it is that the stock market is showing no direction, and the daily behavior has become increasingly erratic. The S&P 500 closed with a -1.4% weekly loss, the worst showing since November 7th, and the best performing sector was Utilities (+7.1% for the week). The index is actually lower now than where it closed at the end of November, and over the past three months, Consumer Discretionary, Tech, and the Financials are all in the red.
Barbell Strategies Are Paying Off: There are ways to minimize risks — through hedge-fund or barbell strategies: if you have been long the S&P 500 equal-weight index this year while short the cap-weighted index, you would be up nearly +6%. A long Dow-short Nasdaq barbell has generated a net positive price return of +6% as well. Being long value and short growth would have yielded you +7%.
Treasury Shorts Are Squeezed Hard: What a fantastic week for the Treasury market — the 10-year T-note yield sliced -18 basis points to 4.04% and the long bond down -16 basis points to 4.69%, levels we have not seen since late November. The shorts are being squeezed — there are still nearly 870,000 net bearish non-commercial bets on the CBOT regarding the 10-year T-note (you have to go all the way back to November 2021 to find the last time the speculators in the futures & options pits were net neutral).
