Market On Close, Tuesday 20 January
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The Yield Also Rises
by Alex King, CEO, Cestrian Capital Research, Inc.
So, choose your fighter. Today’s selloff was due to:
A: Rising Japanese bond yields killing the free-money carry trade
B: Rising tensions between the US and the EU
C: Tom Lee calling for a correction then a rally into year end
My own view is that we can blame (A) primarily, with this real reason - money getting more expensive - being given air cover by (B). Although now that Tom Lee is in business with both Peter Thiel and Mr. Beast, I wouldn’t underestimate Fundstrat’s market-moving abilities!
But for the record, here is 30yr and the 10yr yield evolution in Japan since the recent lows. You can open a full page version, here.
When the world’s supply of cheap money is causing money to be more expensive, it’s likely that demand for that money is going to slow up, meaning the uses of that money - US securities for instance - are going to see less buying pressure.
Today was a rough day for the US equity indices, and for crypto. Bonds didn’t suffer too badly and a number of sectors - yes, the ones we’ve been flagging as laggards that are likely to move up - were green.
Let’s go see what the damage looks like. But first a word from our marketing department:
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