Mr. Market discounts harder than the artist formerly known as J.C. Penney. Prices change well in advance of fundamentals, allowing markets to bottom midway through a recession. By the time the NBER declared the recession over in September 2010, the S&P 500 had advanced 70%.
Over the last 16 weeks, the yield on the ten-year treasury has risen 75%. We haven’t witnessed such a move in over 50 years. The spike is the market discounting Bernanke’s eventual taper. What’s remarkable is that consensus has the fed tapering it’s asset purchases by 23%. It’s hardly as if they are pulling the E-brake on this locomotive, Ben is merely taking his foot off the pedal, slowing from 85 to 65.
I wonder is this is setting up for a sell the news event. With most bonds and bond proxies getting slammed over the past few weeks, have said assets already discounted the taper?
Performance since May 1