what is the 10 year treasury rate?

I think people do not like to think about yield for yield’s sake. With 10 year treasury rate at 3.05, that is approximately what I believe will be the Fed’s stop on rate hikes if they are just stopping at two or three more times before the year is over. Remember when interest rates were near zero, the stock market skyrocketed while interest rates declined sharply. The 10 year treasury rate is a function of the interest rate environment, and this environment is one where the 10 year yield is making headway up towards 3%.

previous leg of your long market cycle;

I think this is a very important point to make. The market is like a pitcher throwing one inning at a time. There will always be two more innings. The last leg of the market is most certainly the most difficult, because it is the one that can’t be predicted in advance and it does not happen without much focus on interest rates. I believe the rate hike from the treasury came a year or so ahead of the current market expectation, and perhaps as a result, interest rates have been moving up to a point where they are almost certainly at the top end of what the market wants.

risk versus reward

keep your eye on your long term Treasury yield, it is the direction you need to focus on. One rate hike is not a quarter of decline, it is a single point of decline in yield. My opinion is we are seeing this now, as the treasury yield moves back towards year old highs. The Treasury yield has been rising significantly over the past year. In order to avoid potentially being stuck with an instrument that appears to be falling out of favor with investors, I recommend getting to the sidelines and getting ready for the next leg of the long market cycle.

no economic downturn

interest rates are rising and now is the time to sell some holdings and buy those that are increasing in yield. This is not the time to be adding any new positions or having financial pain to start the year. I believe a 10 year treasury yield of 3.60 to 3.70 is a reasonable range where this market can be expected to be at for the next year. Although, the 10 year has been trending up significantly over the past month and with rates close to its highest level in the past ten years, it might be prudent to begin looking at bonds as a potential long term investment. Keep your eye on the price, but also keep your focus on the 10 year rate. Ten years ago, i thought we were close to a decade long bull market, yet we are well into our third year of a multi-year bull market, and rates have not entered a recession. In addition, the treasury bond only yields 2.4%, which is a very low rate for most ten year treasury yields of the past.

your comments;

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This article is for general informational purposes only. It is not a recommendation to buy or sell any security and is strictly the opinion of the writer. Information contained in this article is impersonal and not tailored to the investment needs of any particular person. It does not constitute a recommendation that any particular security or strategy is suitable for a specific person. Investing in publicly held securities is speculative and involves risk, including the possible loss of principal. The reader must determine whether any investment is suitable and accepts responsibility for their investment decisions. Dane Bowler is an investment advisor representative of 2MCAC

thank you

thank you for reading, i am sure many have read the cautionary statement from November 2015 and have benefited from it, i appreciate it, and am grateful for the support from readers who have been asking for it.