The benchmark 10-year Treasury touched 4% today. That’s the highest yield since October 31, 2008, according to Treasury data.
THE FOCUS TURNS TO BONDS, INTEREST RATES & INFLATION
As the benchmark 10-year Treasury Note inches higher, closing in on 4%, the chatter about interest rates and inflation is heating up.
PUT A FORK IN IT?
Bloomberg News reports:
The biggest increase in employment in three years makes it “pretty clear” the deepest U.S. recession since the 1930s has ended, said the head of the group charged with making the call.
MORE CHATTER ABOUT THE MARCH JOBS REPORT
Yesterday’s monthly update on the labor market received a lot of attention, as you’d expect, given that it was the first real month of substantial gain for payrolls since the recession began in December 2007. But for all the cheering, there’s still plenty of sobering realities to consider, including a few observations that caught my attention over the last 24 hours:
JOB GROWTH WORTHY OF THE NAME ARRIVES…FINALLY
The labor market at long last posted a month of job creation that’s immune to second guessing, or so it seems. Nonfarm payrolls rose by 162,000 in March, the Labor Department reported this morning. That’s the biggest monthly advance in three years and the first convincing evidence since the recession began more than two years ago that the job market is recovering.
INITIAL JOBLESS CLAIMS FALL AGAIN
After a rocky period in February, the downtrend in initial jobless claims seems to be back on track, as today’s
update suggests. Are we setting ourselves up for disappointment? Perhaps not, although tomorrow’s monthly report on nonfarm payrolls will shed some light on whether we’re being fooled again.
FIRST QUARTER RALLY
March was generally kind to risk exposures. The main exceptions were commodities overall, foreign government bonds in developed markets and investment-grade U.S. bonds. But the slippage in that trio was more than offset elsewhere in the capital markets. As a result, our passive benchmark of the major asset classes—the Global Market Index (GMI)—rose by handsome 3.4% last month. That’s the highest monthly performance since last September’s 3.5% gain.
LOOKING FOR THE RIGHT MIX OF PREDICTORS
There is only one U.S. stock market, but there are countless strategies for estimating the expected risk premium for domestic equities.
The choices come in two broad flavors: fundamental and technical. We could, for instance, crunch the numbers using one of the many variations of discounting future cash flows to assess if stocks are “cheap” or “expensive.” Meanwhile, there are a number of so-called trend-following measures that are worth studying. How to choose? Actually, there’s a persuasive case for routinely analyzing a mix of so-called predictors for evaluating the outlook for stocks, and other asset classes, for that matter. To the extent that a broad and varied menu on this front represents opportunity, the world is brimming with possibilities.
ADP SAYS PAYROLLS SHRUNK (AGAIN) IN MARCH
Nonfarm employment slipped by 23,000 this month vs. February on a seasonally adjusted basis, according to today’s update of the ADP National Employment Report. That’s disappointing news, and it suggests that Friday’s employment report from the Labor Department may be less than stellar. Or does it?
BONDS, STOCKS, JOBS & YIELDS
The 30-year bull market in bonds is fading, predicts Pimco’s Bill Gross, according to Bloomberg News. We’ve heard that one before. In fact, we’ve suspected no less for some time. In our newsletter and on these pages we’ve made the case that the path of least resistance for interest rates is probably up from here on out over the long haul. We continue to expect no less. But the same challenge lurks: timing.