Why Yields Will Go Higher ... and Then Sharply Lower

Real Vision: Finance & Investing

Real Vision

Business News, News, Investing, Business

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🗓️ 27 April 2022

⏱️ 32 minutes

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Summary

U.S. stocks fell sharply on Tuesday, with the Nasdaq Composite leading to the downside with a 3.0% loss two hours short of the close of the day’s regular trading, the S&P 500 off 2.1%, and the Dow Jones Industrial Average lower by 1.6%. Today’s selling reflects concern about growth in the face of what seems to be inexorable inflation, as widespread COVID-19 testing in Beijing augurs a lockdown of the biggest city in the world’s second-largest economy. Concerning the war in Eastern Europe, Moscow will stop sending natural gas to Poland on Wednesday, and Russian Foreign Minister Sergei Lavrov warned there’s a “serious” risk of nuclear war over Ukraine. The Federal Reserve’s increasingly hawkish tone is having its effect, as mortgage rates have moved sharply higher. Home prices are still rising, but new home purchases slipped 8.6% to a 763,000 annualized pace. Mortgage refinance demand is also slowing rapidly. “But there's all this pent up demand they said... not at higher rates there isn’t,” notes Steven Van Metre. Van Metre, founder of Steven Van Metre Financial, says interest rates will eventually go down again, to new record lows, as a simple matter of supply and demand. He joins Maggie Lake for today’s Real Vision Daily Briefing to talk about growth, inflation, and the trajectory of interest rates. Want to submit questions? Drop them right here on the Exchange: https://rvtv.io/3vhH31G Learn more about your ad choices. Visit podcastchoices.com/adchoices

Transcript

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0:00.0	Hi there, everyone. Welcome to the real vision daily briefing. It's Tuesday, April 26, 2022.
0:10.2	A Maggie Lake here with Stephen meter founder of Stephen meter financial on what is an ugly looking
0:16.9	trading day here. We are closing, if not at, very close to the lows of the day. So selling,
0:23.2	seeing that selling pressure as we exit, which is never a good sign when we're looking at stocks,
0:28.6	NASDAQ down, I mean, it's been moving around, but at last check in excess of, oh, now it's 500 points.
0:35.3	This is getting really bad, Steve. So around 514, we'll see where we settle. That's a loss of almost
0:41.1	4%. I'm taking out the previous low from March of this year, S&P 500 down 120, about 2.8%.
0:50.0	And then that down, 810 points, 2.38. So you can, you know, really get a sense of what the
0:57.0	sentiment is in stocks. VIXX is up 20% at its high of the day here heading into the close.
1:05.0	And as we pointed out, bonds have been maybe the bright spot, but, you know, we'll dig into that.
1:11.1	The 10 year is at 275. Remember, just a few days ago, it was knocking at 3% for the yield.
1:18.3	And finally, crypto, as you can imagine, within this risk off atmosphere, getting hit. But not
1:24.0	nearly the selling we're seeing in stocks down about 4% on Bitcoin, maybe 5, 5 and a half on ETH.
1:31.0	So that's where we are, Steve. What's going on? Why are we seeing this severe selling in the equity
1:36.4	market? Well, yeah, I mean, it's interesting, right? I mean, there's clearly a lack of buyers,
1:42.3	and people are headed to the door. I mean, we have the fed time. I mean, we know what the
1:46.6	fed is going to do next week. There's going to be a minimal 50 basis point heightened. Some
1:50.2	rumors now that it's at 75 basis points. And that's got some big investors, institutional investors
1:56.3	spooked. And, you know, for good reason, I mean, fed titans into recessions and, you know,
2:01.2	we can always see, perhaps, the peak of the markets already in. I mean, usually when the yield
2:06.1	curve inverts, you've got another year, year and a half of strong equity gains. A lot of retail
2:11.3	investors have exited the bond market to buy into stocks. But yet, you know, when I look back at
	...

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