Womack Investment Advisers

Following the financial crisis in 2008, central banks around the world responded by cutting interest rates to 0% or even lower.   That resulted in the cry of “TINA, TINA, TINA!” by stock brokers everywhere – “ T here I s N o A lternative” to buying stocks, they cried out. But times have changed. Tadas Viskanta of the financial blog ‘Abnormal Returns’ says the following chart tells “the most important story of the century.”   Tadas notes that yields on some U.S. cash and cash-like instruments have now risen above the dividend-yield for the S&P 500.   The effect may be that the demand for U.S. stocks will fade as the Federal Reserve continues to hike rates, since, for the first time since 2009, there is an alternative to stocks.  

Womack Weekly Commentary April 30, 2018 The Markets A meeting of the minds. The Federal Reserve and the U.S. bond market appear to be in agreement about the direction of interest rates. For more years than anyone cares to count, investment professionals have been predicting the end of the bull market in bonds. Bond guru Bill Gross called the end of the bond bull in 2011 – and called it again in 2013. He wasn’t alone. Strategists who participated in Barron’s Outlooks anticipated rising interest rates in 2014 and 2015, too. The Federal Reserve began encouraging interest rates higher in December 2015 when it increased the Fed funds rate for the first time in a decade. However, the yield on 10-year Treasuries remained stubbornly low. In fact, it fell below 2 percent following the rate hike and stayed there until November 2016. Since 2015, the Fed has raised rates six times. The latest increase, along with signs of higher inflation, helped push bond rates h...