Some of the world’s largest asset managers say equities can continue and continue to rise through the rise in government bond yields. They focus instead on prospects for a powerful economic and profit recovery.
In an informal Bloomberg News survey of more than 50 market players, the majority of respondents including Global State Advisors and JPMorgan Asset Management said they were monitoring the pace of the ascent therein. the yield – and the reasons for it – rather than waiting for a particular level one to indicate a break-even point for stocks. As long as central banks adhere to accommodation policies, the bull run can boost power equity, those investors say.
“Without a shift in the thinking of central banks, we do not expect yields to rise to the point where it hurts rations in general,” said Hugh Gimber, London-based global market strategyist at JPMorgan Asset Management. “As long as the Fed sticks to management, and stays comfortable, willing to look through a temporary spike in inflation, I do not see an environment where production is rising in a way that the a problem for identities in general. “
The rise in government bond yields over the past month has helped fuel fuels from the most volatile segments of the market such as technology and defense sectors, leading to an 11% drop in the Nasdaq 100. But its pressure vaccines in large economies and a promise of recovery in economic growth as well as consumer spending are filling equity bulls with confidence that they can sustain results despite higher interest rates.
At the same time, the yield in the yield and the accumulation of more than 70% in stocks from pandemics pushes asset managers to be more selective. Such as Manulife Investment Management and HSBC Asset Management say that while this is not the time to leave shares, the sale in bonds will accelerate circulation out of the most expensive growth segments of the market and into cheaper and laggard equities that can benefit from the economic recovery.
“If rates were to rise from a normal range, tech stocks would have been fine, but that’s not true when the valuations are as they were,” said Dave King, Boston-based portfolio manager at Columbia Threadneedle Investments. “Possible reopening, this coincided with the increase in yield as well as other factors, positive for the stocks that people did not like last year, whether it was banks or energy. “
The energy sector is the best player in the MSCI World this year, rising around 30%, and finance is next with a 14% gain. More protected and rate-dependent sectors, such as consumer staples and utilities, are both in red.
There have been a few hard weeks in cult stocks that have been favorite investors throughout the pandemic. Tesla Inc. down as much as 36% from the January high before recovering some of last week ‘s loss. Even the marketplace of Apple Inc., the largest U.S. stock, fell up 19% from the highest level.
This environment could also signal a shift from U.S. stocks to other international equities, such as Europe and emerging markets, which have more knowledge of value sectors. After weakening the S&P 500 during last year’s rally from the lows in March, the Stoxx Europe 600 exceeds the American benchmark so far in 2021.
“The risk of equity market correction is driven by higher yields in the U.S.,” said Joost van Leenders, Amsterdam-based senior investment strategy at Kempen Capital Management. “The U.S. economy has recovered more. faster than the European economy, and another major fiscal stimulus bill has just been agreed in. Inflationary pressures in Europe appear to be negligible, from a stylistic point of view, growth is more at risk than value. ‘Europe could benefit from US’
Investors who are on the lookout for a specific Treasury yield rate that could seriously damage global equity have identified a range between 2% and 3% for 10-year bonds.
“It is important to remember that historically, rising output has been consistent with rising markets, as both are driven by growth, and we believe that will remain the case. this time, “said Mark Haefele, chief investment officer at UBS Global Wealth Management.” lower time and risk premium, starting to challenge conventional valuations more. “
The break in bond market sales in the middle of last week showed how quickly stocks and growth sectors can recover. The Nasdaq 100 on Tuesday rose 4% for the biggest jump since November, reflecting a desire for tech names to remain strong.
“If the increase in bond yields is too rapid or too high, it is negative for equity valuation. However, if controlled and moderate over time, the allowances can accommodate the change reasonably well, “said Nathan Thooft, global head of Boston-based asset distribution at Manulife Investment Management.” Especially if for higher rates to grow better than just higher inflation. “