America Remains the Sanctuary
Over 20 years, US long bonds' total return has BEATEN non-US stocks
Going through my inbox for the first time since a few hours after NFP, NOT slowing down MUCH to news of another RRR cut by the PBoC or the detailed drama of the BITCOIN weekend rollercoaster, I couldn’t help but share this VIEW from Bloomberg’s John Authers.
It is both an uncommon refrain AND something US money managers may consider as we head into the final turn of the year, at least as far as portfolio construction is concerned.
On the one hand, it speaks TO a refrain which is rarely heard — US LONG BONDS aren’t THE single worst thing on the planet.
On the other hand, it may speak TO a global rotation OUT of a performing asset into a somewhat less performing one — a rebalance headwind for the US rates market?
Making Sense of This Economy Is a Rorschach Test
How you see the ink blot of data may say more about you than the numbers. But markets are taking a position that’s ready for implosion.
December 6, 2021, 5:15 AM UTC
… Amid all this, use of the U.S. as the ultimate shelter or “safe haven” continues. U.S. large-cap stocks are even beginning to take on some of the characteristics of Treasury bonds, as international investors treat them as a store of value. The resumed gains for long-dated Treasury bonds, which have sent their yields down, must reawaken concern that U.S. bonds are in a bubble. Yes, the Fed has been taking great steps to prop up the market, but the latest gain for bonds has come when the Fed is plainly withdrawing that support at the margin, and warning of futher retreats to come.
For a dramatic demonstration of how safe U.S. bonds are perceived to be, over the last two decades the Bloomberg index of U.S. long Treasury bonds (of 20 years or more) has returned more than the MSCI equity index for the world outside of the U.S.
The belief in the U.S. as a sanctuary persists even as investors assume a bearish crouch. It’s an article of faith that remains intact and is currently bearing a lot of weight. For now, the idea evidently lives on that the Fed will not have to tighten so much that it undermines the Treasury market or creates any difficulty for the federal government in servicing its debt…
It is NOT to suggest that the long bond (TLT for all intents and purposes) has beaten world stocks like a rented mule but rather, a representation of how it has been proven, one of the worlds MOST hated asset classes — US RATES — have actually been more than just a good portfolio hedge.
Food for thought. Auther’s Rorschach test NOT to be confused with an Arnold Horshack’s test …
More of that from the inbox (and the sell side) in due time. For now, though, happy Monday.
Feiss