Since when does good news become bad for the stock market?
Since when does good news become bad for the stock market?
The answer probably lies in the desire of investors to see the American interest rate go down. But as the economic data show that the situation is quite good, the consumption is not eroded, the jobs are not disappearing and the growth figures are not collapsing – the expectation that the interest rate will fall is receding and thus driving investors away from the market. Not to mention – makes investors sell shares.
I believe that today we are already in a place where everyone remembers and recognizes the norm – the current interest rate is not unusual and everyone recognizes that it will not return to zero and the era of cheap money is over for now.
Now you have to know how to deal with the new conditions and there are quite a few players in the market who are not familiar with such interest and inflation levels. The same is true for Israel. More than 10 years of cheap money drugged the public.
Therefore, we need to understand and remember that the markets know how to give fantastic returns even in conditions of interest and inflation as there are today (and even in worse conditions), so we should not be dragged into panic.
And of course I will not ignore the elephant in the room – the 10-year US government bond is trading at a yield to maturity of 4.81%.
This means that an investment in a US government bond for a period of 10 years will yield us 4.81% every year. After getting used to very low yields for so many years – it seems that there is a profitable deal here.
Where is the catch?
If we want to realize the investment in the middle of the road in order to invest elsewhere (a good stock market or better bonds) – it is quite possible that we will lose this return since it is calculated under the assumption that we invest for the entire period until maturity.
So like everything in life – there are no free meals.