Market Update for March 25, 2022
In my blog post on 3/18/22 I noted that the “10-year Treasury is up to 2.15%. 30-year mortgage average as of today is 4.526% and a 15-year is 3.655%.” Now just a few days later, the 10-year is up to 2.475% and the two respective mortgage rates are 4.53% and 3.85%.
As we know, rising rates are bad news for bondholders, and the Aggregate Bond Index is down over 6% year-to-date. Over in "stock land," the S&P 500 has cut its losses to 5% year-to-date. Please note the shorter-end of the curve is going up faster than the longer-end, which is to say short-term debt rate increases are outpacing longer-term debt rate increases, thus creating a flattening of the yield curve. An inversion of the yield curve happens when short-term rates exceed long-term rates, and while yield curve inversions tends to precede recessions, there have been yield curve inversions in the past that did not ultimately lead to recession. Here is an older paper discussing this topic.
And here is a recent article discussing the yield curve and why it matters to investors.
I am happy to see the stock market not give back gains this week, as many times the market meanders upwards in a “two steps forward, one step back” fashion, but again, that was not the case this week. I continue to favor stocks over bonds, large-cap over small-cap, domestic over foreign, and something like an even split between value and growth styles.