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This is a look at two ETFs: the granddaddy of them all, SPY (the S&P 500) and the high-yield corporate fund symbol HYG. In normal markets, they pretty much mimic the behavior of the other. As you can see, for many years, they are joined at the hip.
Of all the “help” the federal government provided last year, perhaps the most distasteful was to have gobbled up ETFs from the good, honest people at Blackstone led by this decent, honest, and generous man. Here are some of the ETFs that the Fed bought with freshly-printed dollars. I offer these as more supporting evidence about how the interest rate world is turning, because they’re all turning south as these interest-sensitive instruments erode. It doesn’t matter that they’re declining. The Fed can always print up more trillions to cover any losses.
There was a time when the most boring, reliable financial investment around was TLT. I mean, come on, it’s a bond fund. You put your money in and collect your modest interest payment and life goes on. But not anymore. Just look at this – – seven months, and 22% of the value gone. Losing 22% is expected for the likes of Tesla. But – – government bonds?
Tomorrow is the big day, of course. Powell time again. Two hours before the market closes, the announcement rolls out, and half an hour later, he does his press conference. As always, caution will prevail, and every syllable will be selected carefully. Added to which, whatever movements the market makes immediately following the announcement won’t mean much. It usually takes until at least the market close before some kind of clarity is there with respect to reaction.
For many months, the 10-year minus 3-month has been recovering from its “a recession is here” depths.
Not that you need any more evidence of rising interest rates, but take a look at symbol TBT, which is the double-inverse fund based on TLT. In other words, this thing is going to surge as bonds collapse:
