September 30 2014
Last week offered some lessons in career management, economics, and investor impulse, among other things. Derek Jeter, the well-loved Yankees shortstop, finished the final home game of his career by smacking a game-winning hit. Throughout his last season, ticket prices for Yankees games soared on the secondary market with $16 bleacher seats selling for more than $200. By the end of the season, ticket vendors were asking as much as $11,000 a seat.
On the other coast, Bill Gross, renowned bond guru, did not retire. Gross left the firm he helped found for a smaller money manager. Shares of stock in his new company rose about 43 percent as investors anticipated the potential inflow of new assets. They also anticipated an outflow of assets from his old firm, according to Barron’s, which caused yields on Treasuries and corporate bonds to move higher on Friday, pushing prices south.
Gross’s shifting alliance wasn’t the only thing churning bond markets last week, however. Trepidation about global economic growth and geopolitical matters (e.g., Russia vs. Ukraine, etc.) had investors fleeing to “safe assets” earlier in the week. That pushed Treasury yields lower and prices higher. Barron’s reported:
“Thursday’s markets were all about a flight from risk, in part because of reports of a Russian draft law to confiscate foreign-owned assets in retaliation for Ukraine sanctions. More important is the message from “Dr. Copper,” suggesting weakness globally, whether in faltering Europe or slowing China. All of which suggests it will be an even more “considerable time” until the Federal Reserve raises interest rates.”
Volatility may be the name of the game for a while. Bloomberg suggested looking backward for guidance about the future. In 2013, Fed Chairman Ben Bernanke suggested tapering could begin sooner than expected. Treasury yields leapt by 1 percent as the market threw a “taper tantrum.” Just last week, Chairwoman Janet Yellen warned markets the Federal Open Market Committee statement was not a promise about the timing of rate hikes. Bloomberg said investors remained complacent. Apparently, they weren’t concerned unexpected economic strength in the United States could move the timetable forward.
At the end of the week, the Commerce Department reported economic growth was more robust than originally thought during the second quarter. The economy grew at the fastest rate in more than two years.
- Data as of 9/26/141- WeekY-T-D1-Year3-Year5-Year10-Year
- Standard & Poor’s 500 (Domestic Stocks)-0.0140.0730.1670.1950.1330.06
- 10-year Treasury Note (Yield Only)2.5N/A126.96.36.199
- Gold (per ounce) -0.51-9-188.8.131.52
- DJ-UBS Commodity Index-0.3-5.2-6.7-6-0.8-2.3
- DJ Equity All REIT TR Index-114184.108.40.206.7