Rate sensitives

On a day in which the accelerated-time-frame-of-taper + market-read-on-subsequent-lift-off starts to feed in, no surprise that long duration stocks (REITs, secular growth health names) and gold sell off.


You can see the pop in the US 10 year nominal treasury yield below (top left, to 1.44%), which, given relatively flat breakevens (10yr BE) equates to a steadily higher real interest rate (bottom right, 10yr, -.89%).


The sorts of stocks that do well when cyclical pressures steepen the yield curve (banks, insurers, cyclicals, energy) are doing just that.

We are overweight energy, and select cyclicals (fertilisers, engineers) and insurance companies, and underweight the banks, a topic we’ll touch on in our next note.

Our underweights to fixed income will likewise be adding value, on a day like today.

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Please note that past performance is not a reliable indicator of future performance.

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