Analysts at Investing.com say the inverse correlation between stocks and Treasury yields is likely to continue until below the 4.50% level. morgan stanley (New York Stock Exchange:).
Benchmark 10-year Treasury yields on Friday pointed to solid U.S. manufacturing output and single-family home construction, after retreating from multi-month highs last week on softer-than-expected core inflation data. It rose slightly in response to individual figures.
The numbers come on top of continued uncertainty over the potential impact of President-elect Donald Trump's policy plans, as well as concerns that the Federal Reserve could ratchet up potential interest rate cuts later this year. It helped maintain expectations.
While stocks continue to gain some strength on hopes that Mr. Trump's return to office will usher in an era of deregulation and corporate tax cuts, recent increases in bond yields threaten the attractiveness of stocks.
Morgan Stanley analysts led by Michael Wilson said, “The direction of the index is primarily driven by long-term yields and the term premium, the excess that investors demand from holding past-maturity bonds instead of short-term bonds.'' “It will be determined by the level and direction of earnings.” said in a note to customers.
It added that the “negative correlation” between bonds and stocks tends to persist until the 10-year Treasury yield “falls below 4.50% or the term premium sustainably declines,” or both. .
Analysts said that in the current trading environment, they prefer “high-quality stocks across industries that exhibit relative earnings correction momentum,” particularly financials, media and entertainment, and consumer services, over consumer staples. Ta.
