Discounting the Taper

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

TLT -16.6%

PFF -7.6%

JNK -5.5%

LQD -8.7%

IYR -15.9%

REM -25.3%

MUB -8.9%

XLU -9.4%

About Michael Batnick

Trying to navigate this Hilsenrath driven market one weekly candle stick at a time.
This entry was posted in Uncategorized and tagged , , , . Bookmark the permalink.

One Response to Discounting the Taper

  1. Pingback: Hot Links: Pretend to be Shocked | The Reformed Broker

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s