How U.S. Stocks Have Fared Since 7/8/16

Bob Carey
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How U.S. Stocks Have Fared Since 7/8/16

Posted Under: Conceptual Investing

View from the Observation Deck

The yield on the 10-year Treasury note (T-note) closed at an all-time low of 1.36% on 7/8/16, according to data from Bloomberg.
For comparative purposes, its all-time closing high was set on 9/30/81 at 15.84%, while its average yield has been 6.19% since 1/5/62.
From 7/8/16-10/16/18, the yield on the 10-year T-note rose from 1.36% to 3.16%, or an increase of 180 basis points.
Rising interest rates and bond yields can influence the performance of stocks over time. As the theory goes, if yields climb high enough then bonds can become an attractive alternative to stocks.
In a March 2012 article in Businessweek, Standard & Poor's stated that, since 1953, U.S. stocks posted their best returns when Treasury yields were rising towards the 4.00% level. It wasn't until yields exceeded 6.00% that stock prices would begin to retrench.
The cumulative total returns in the chart indicate that equity investors have likely prospered since the yield on the 10-year-T-note began its upward climb from its all-time low on 7/8/16.
Our key takeaway from the chart is that the top performing sector indices in the period are more cyclical in nature.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is a capitalization-weighted index comprised of 500 stocks used to measure large-cap U.S. stock market performance, while the 11 major S&P 500 Sector Indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector. The S&P MidCap 400 Index is a capitalization-weighted index that tracks the mid-range sector of the U.S. stock market. The S&P SmallCap 600 Index is a capitalization-weighted index that tracks U.S. stocks with a small market capitalization.

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Posted on Thursday, October 18, 2018 @ 1:17 PM • Post Link

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These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.

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