Was there any negative-yielding global debt in any of the last yield curve inversions?
The LPL strategists researched this question and found negligible negative-yielding sovereign debt globally before the financial crisis, and none in the United States. Looking at history, we’ve never seen a time with this much sovereign debt in the negative. The most recent figure was $17 trillion. Currently various yield curves have inverted, but the good news is the U.S. yield curve is back above 0 and steepening.
What, if anything, are equity market sentiment indicators telling us? Any extremes in sentiment in any part of the investment universe?
Everyone asks “how bad are things?” and no one ever asks “how good are things”? In a recent survey, only 18% of global managers expected rates to be higher 12 months from now; the number was 87% a year ago in September 2018. Market sentiment tends to panic on all pullbacks. However, the contrarian play is to look for higher rates going forward. Right now the most crowded trade is bullish bonds. This could mean rates make a surprise move higher.
Are rates being lowered for the wrong reasons? Is there a time period where we’ve gone too far?
The market expects a rate cut, and so do we. We believe the Federal Reserve will make another rate cut of .25% in October, but we don’t see the fed funds rates going lower than 1%. The other question is how much of an “insurance” cut do we need.
How did you know you wanted to be in the world of finance?
We both learned a lot during the tech bubble in the 1990s, and we also learned some very expensive mistakes along the way. Both strategists talk about their interests in numbers and getting started in financial services.
Best advice for a new investor? Have a long-time horizon and use pullbacks and recessions as an opportunity. Use a financial advisor to help you. Slow and steady wins the race. Fear and greed: Be bullish when the markets are fearful.
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