US Stock Market Shows Recovery Signs, Fund Managers Optimistic

The US stock market has, so far, witnessed a rise in Treasury yields. Last week, the yield recorded on the benchmark ten-year Treasury note or US T-note rose to a one-year high of 1.36 percent. The expectations that further fiscal stimulus and progress in the nationwide vaccination program would further propel economic growth are reportedly fueling this development in the US T-note, which rises when bond prices plummet.

According to the report posted online by the Australian daily compact newspaper The Sydney Morning Herald, the US stock market’s navigation of the coronavirus or COVID-19 trading environment is leaving fund managers in the country in hopeful spirits. 

For instance, Paul Nolte is monitoring whether the surging yields eventually come with a modification in tone at the Fed that suggests the US Federal Reserve System will commence tapering its bond purchases as it reins in its stimulus that could shake the market. 

However, for now, the portfolio manager at Kingsview Investment Management is still not pulling back on his equity exposure due to the recent surge in yields. Nolte is convinced a strengthening economy will carry on buoying stocks, specifically those that should shine in recovery, like value shares and financials. He said that the steeper yield curve is the bond market’s method of informing investors that the US economy is recuperating and regaining its health.

J. Bryant Evans recently added mortgage company and bank stocks to a high-dividend portfolio to take advantage of a rising rate environment and improving economic outlook. At Cozad Asset Management, the portfolio manager aimed a 3-percent yield on the 10-year for when bonds might commence contending more aggressively with stocks. 

Evans said that he would urge his clients some balance and hold on slightly before moving to fixed income. He explained his viewpoint that it is because interest rates are still extremely low at this point. 

The surge in Treasury yields comes as the S&P 500 hovers close to all-time highs at the culmination of a fourth-quarter earnings season that has witnessed firms’ overall report earnings 17.2-percent above expectations, as per Refinitiv data.

We are in the same boat with US fund managers in their optimistic position. They appear to be in a wait-and-see stance at this point and feeling slightly upbeat, considering that the United States is still adjusting to the recently-inaugurated Biden Administration. Additionally, the Western economic power is witnessing the vaccination program rolling out countrywide and still awaits how this development could impact the US stock market and US economy overall.

We believe that the yields are rising because of the investors’ expectation of the US economy getting back at its feet. We are hopeful that the US stock market can continue to recover, and we support President Joseph Biden’s $1.9-trillion COVID-19 relief package making this aim achievable.

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