THE ONE THING
Stocks are holding near their highs while the cost of money stays high. The 10-year Treasury yield is 5.24 percent and the S&P 500 sits at 7,807, so equity valuations are being asked to carry a much larger discount rate than they did a year ago. The useful client question this week is how a portfolio behaves if yields, not earnings, drive the next move.
MARKET SNAPSHOT
| S&P 500 | 7,807.24 | -0.06% vs prior close |
| Russell 2000 | 277.90 | -0.37% vs prior close |
| Nasdaq 100 (QQQ) | 746.04 | -0.7% vs prior close |
| Gold (GLD) | 382.15 | -0.63% vs prior close |
| High Yield (HYG) | 77.29 | 0.08% vs prior close |
NEXT BIG NUMBER
The number to watch is the 10-year Treasury yield at 5.24 percent. The consumer price report is due Wednesday morning, and a surprise in either direction is the most likely trigger for a decisive move in yields and, with it, in small caps and credit.
ADVISOR TIP OF THE DAY
Before the next client review, pull each portfolio’s largest single-day decline over the past year and set it beside the client’s stated risk tolerance. The gap between the two is usually the most productive conversation of the quarter.