jejejeje ... comento lo de Rajoy , para q. tanto él como su equipo económico, (habría q. enviárselo) vea lo q. realmente opinan de la situación económica española los neutrales economistas de fuera ....y Reity no es precisamente de podemos !!! jajajaja ... pero en su comentario, define a España (junto a Italia) como economías europeas de alto riesgo y les da el acertado calificativo de anémicas ....
Clase magistral de visión macroeconómica en dos parrafos del bueno de Reity .....
It's Complicated
Stocks went -1.4% lower Friday based upon this equation:
Stronger employment #s = the sooner the Fed raises rates = higher bond rates = lower valuation for stocks.
Is it truly that simple? No it's a bit more complicated than that. Let me break it down for you.
Yes, the Fed is now more likely to start raising rates this year. This should be considered as a merit badge for the US economy that it has rebounded well enough to not need so much accommodation. In fact, the stock market typically keeps rising for 2-3 years after the Fed starts raising rates.
Bond investors took notice and pushed up US 10 year Treasury rates from 2.11% to 2.24% Friday. That is a BIG one day move in the bond world. However, how much higher will bond rates go with Europe on the QE bandwagon where German 10 year rates are at 0.4% and sub-prime nations like Italy and Spain are both around 1.3%?
The spread between the US and Germany is much wider than historic norms. And most CERTAINLY rates for Italy and Spain should not be lower than the US given their anemic economic status. As such, I expect demand to markedly increase for US Treasuries. This should keep rates in check and would be surprised to see them venture that far north of 2.5% this year (which was the average in 2014).
To sum up, I am not fearful of a Fed rate hike as that is typically good for stocks given that it means the economy is in good shape and stocks stay on the uptick for 2-3 years after. And I believe that worldwide government bond competition will lead more investors to US Treasuries to keep a lid on rates and thus continue to make stocks look attractive by comparison. Remember that rates moved up to 3% in 2013 and yet still the S&P rose 32% on the year.
My view of the investment world may not have been the same one adopted by other investors on Friday. Yet when level heads prevail I think that more people will come around to this same understanding. As such, I believe that this is a buyable dip with higher highs on the way this year.
Best,
