Interest Rates
Igor Manukhov - Jun 07, 2024
Interest rates seem to be trending downward. The challenge of the December low is not out of question.
I have been looking at recent changes to interest rates and it appears that the general bias is now for them to go lower. Over the last few years, lower rates have been generally good for stocks. Additionally, falling interest rates tend to benefit longer-term bonds.
The chart below shows the current state of a 10-year US Government bond yield. It is sitting right around a very important level of 4.3% (the horizontal green line). Considering that the RSI index (a measure of momentum) is starting to approach an oversold level (reading near 30), I would allow for some short-term rate rebound, but it does appear that rate could come down to around 4% (the horizontal orange line) and possibly even challenge December level, when bond yields went down to 3.78%.
If that does materialize, expect bonds to do well, as well as high growth areas of stock market. Time will tell if this does materialize, but I believe it is important to consider where the puck might be going.
