Our recent stance on equities remains intact.
We are in wait to short mode at these levels and feel comfortable with that view. There are no strong narratives at the moment, but the implosion in yields is simply amazing, and we ask ourselves if equity “people” will wake up to what yields are implying.
US 10-year yield has gone aggressively negatively sloping. 2% is a huge level to watch.
The Japanification of Germany can now be called Germanification. German 10-year yield at -0.26%. The trend is very strong, and among the biggest casualties is the European banking space.
The extreme move in yields has spread to other countries. Remember the PIIGS? Portugal 10-year yield is down to absurd levels at 0.6%!
Where yields will head nobody knows, but one thing is sure, watch Fed coming up as either way move in yields risks spilling over to “calm” equities.
Source, charts by Bloomberg