Friends

It was another ugly day for stocks as we now have added rising interest rates into the mix along with elevated energy prices and uncertainty about the war in Iran. I saw a note today that reminded me of 1987. A lot of folks blamed what they called “portfolio insurance” on the crash of 87, but I always contended that rising interest rates finally took its toll. In 1987 rates rose from around 7% to over 10% on the 10 Year Treasury Note. That 10% number seemed to be the trigger. Recently we have seen the 10-Year yield rise from 4% to 4.66% today. Now, I know that is a much lower number than in 1987, but what might be interesting is where a modern-day tipping point might be. 5% perhaps? Just a thought.

As for today, by the close the Dow Jones Industrial Average was down 322 points to finish the day at 49,363. The S&P 500 was down 49 points to close at 7,353. The Nasdaq Composite Index was down 220 points to close at 25,870. Gold was down $70 to trade at $4,487 per ounce, while oil was down $.07 to trade at $108.59 per barrel WTI.

My interest in the long bond yield is not a prediction of any sort. Right now, we have an expensive market but not as ridiculous as moments in the past. And, by the way, we have really good corporate earnings to hang our hat on. But rising interest rates and elevated energy prices combined are a forceable headwind for stocks in general. Just worth keeping an eye on.

Have a nice evening everyone.