If you put a large amount of faith in the copper/gold relationship as the sole explanation for US treasury yields (which we don’t think one should, but still, people do) you would be anticipating yields closer to the 3% mark.


That’s a key driver of the bearish argument to both stocks and bonds (unambiguously bad for bonds, where your carry gets overwhelmed by the duration if yields were to return to 3%, and plausibly bad for stocks in that the discount rate would be higher and would get there quicker than what’s “priced in”, causing equities to sell-off alongside bonds).

We view the magic number as a range between 2.25-2.5%. A threat to long duration growth stocks, and may well cause a market that is expensive, to our minds, to sell-off, but not dangerously so, and in any case we are well positioned to take advantage of any such correction caused by such a “taper tantrum”.

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This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.

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

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