When stocks fluctuate, bonds send more ‘orderly’ signals

Stock market attracts investors another wild ride on Tuesday, plunge, recover, and then fall again. The S&P 500 index opened 1.5% higher on Wednesday, but what does that mean after such a volatile week for stocks?

The Federal Reserve Policy Announcement at 2 p.m., the East could provide some clarity, with uncertainty over what the central bank will say about the main source of recent volatility, according to market watchers. school.

Stock investors expressed confusion about how aggressively the Fed would act to combat inflation, and the details of its plan “will provide some much-needed insight into the positions of officials.” Fed,” said Anu Gaggar, chief strategist at Commonwealth Financial Network.

That said, the turmoil in equities is not being reflected in other major markets, DealBook newsletter notes. Some strategists say those markets could give a better signal of what’s next for the economy, given the dramatic rise in stock prices during the pandemic.

Government bonds, which are in many ways more closely tied to the Fed and the economy than stocks, appear to be on the upswing. Yields, inversely proportional to price, have fallen over the past week, which is usually a sign of anxiety, but not by much.

“The bond market is not ready to move unequivocally one way or the other because the economy is still in pretty good shape,” said Vincent Deluard, strategist at StoneX Group.

Corporate bonds also remain under control, which suggests that investors are not overly worried about economic growth prospects (an important factor in a company’s creditworthiness). In 2008, for example, corporate bond spreads – the difference between the yield on corporate debt and government equivalents – rose 4 percentage points. At the start of 2020, the spread has grown by almost 3 percentage points. In the past two months, the enterprise disparity increased by less than 1/5 of a percentage point.

Eddy Vataru, a bond fund manager at Osterweis, said the recent bond revaluation has been “quite orderly”.

https://www.nytimes.com/2022/01/26/business/stocks-bonds-economy.html When stocks fluctuate, bonds send more ‘orderly’ signals

Fry Electronics Team

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