Sep 26, 2023

US consumer confidence data is the next release for the economy on Tuesday, with stocks feeling the pressure of Fed rate concerns.

us30 chart

US30: Daily Chart

The US30 index fell in the Asian and European sessions but has tried to mount a comeback in the US session. The index was still down by -0.12% around midday as the bounce was weak.

Stocks are still under pressure from last week’s hawkish Fed talk, and the US 10-year yield was elevated to 4.5% on Monday, the highest level since October 2007.

Analyst Albert Edwards reminded investors that the levels were “not seen since October 2007—just before everything fell apart”. 

Edwards was referring to the fall period, which was the start of the financial crisis, with subprime debt issues spilling over and crushing the housing industry in the US.

“Meanwhile, investors are marvelling at the equity market’s resilience in the face of rising bond yields. Funny, it was just the same back in October 2007 as the S&P hit a record high—just before everything fell apart,” he said.

“And to cap it all, the oil price in October 2007 was, like now, surging above $US90 a barrel (on its way to $US150). Three months later, after everything had indeed fallen apart, the US was in recession, bond yields and equity prices were collapsing, and the Global Financial Crisis was upon us”. 

However, Edwards said that the banking system is very different from that period and is safer and more resilient.

Billionaire hedge fund investor Bill Ackman is also predicting higher levels on the 30-year Treasury and continues to bet in that direction.

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