Duration & Volatility Follow Ups

Today we have some market opinions and data that serve as good follow ups to our discussion this week about duration and volatility. 

PIMCO is warning that our excessive debt loads could take the treasury market back to where it was in the 1980's in terms of very high yields like 8, 10 or 12%. We talked yesterday about whether intermediate treasury yields might ever get to 6 or 7%. What PIMCO is calling for would be a much rougher environment for the economy. 

Possibly related, Torsten Slok said the following via a Tweet from Katie Greifeld.

We mentioned that after starting with six expected rate cuts for 2024, consensus backed off to three and maybe now less, Slok says no rate cuts. If price inflation continues to hover above 2% then I'm not sure why the FOMC would lower rates in a meaningful way the market is hoping for. 

And if that wasn't all, BCA is calling for a recession which could send stocks down 26% by their reckoning.

A twenty whatever percent decline in conjunction with a recession is not particularly noteworthy, we've all been through worse. I think the odds of a recession coming from the current mix has lessened quite a bit meaning that something new would have to be added to the current stew to tip us into a recession. That is little more than a guess though, it doesn't really matter in that we know there will be more recessions in the future, typically the stock market reacts, that reaction then ends and the market goes on to a new high. The only variable is how long that takes. 

The above table is from Charlie Bilello. It quantifies things that we talk about all the time, first being that stocks are the thing that goes up the most, most of the time. I've been saying stocks go up 72% of the time and that appears now to have nudged up to 73%. I think the table is yet another confirmation of how things work. Markets go down about a quarter of the time. 

The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.