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Balancing forces

As we continue to follow the developments of the Middle East conflict, the market is trading as if the war is contained within the region, and despite its cruelty, seems to be betting it will not involve a conflict at a bigger scale. In the economic front, and from the technical side, the market can find comfort in the fact that if the #fed has concluded its hiking cycle, both equities and bonds have found tailwinds and have, historically, performed very well after the Fed announces the end of the cycle. In our current situation though, valuations are still high and the long end of the curve is moving up in yields, worried about the amount of debt the treasury needs to issue to cover the deficit. It also worries about the potential cost of adding resources to another war, which is typically why empires implode. Despite that fact, the market still considers the long end of the curve as a safe haven in times of concflict. Once again we have balancing forces, and the Treasury may have a short window to issue debt to satisfy the demand of non traditional buyers.


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