OLOXF - Weekly Market Pulse: Are Higher Interest Rates Good For The Economy?

2024-04-16 10:30:00 ET

Summary

• The rise in rates last week pushed the 10-year to its highest level since the peak at 5% in October of last year.
• Gold has been setting new highs, trading above $2400 at one point on Friday before succumbing to some profit taking.
• Year-to-date, the gainers are down to Large Cap and commodities. Small cap (S&P 600), intermediate Treasuries, and REITs are all down for the year.

Interest rates surged last week on the back of a hotter-than-expected inflation report that wasn’t actually that bad (see below). Not that my – or your – opinion about these things matters all that much to the market. In the short run, all that matters is what the majority believes is the truth. What they believed last week was that inflation isn’t falling fast enough and the Fed will not be cutting rates anytime soon. That was enough to send the bond market into a tizzy which impacted, well, everything. Stocks were down with small and midcaps taking it worse than large caps. Real estate was down but wasn’t the worst performing sector as financials, materials, and healthcare all fared worse. Commodities and crude oil were down even with the Middle East bracing for more conflict between Iran and Israel. Gold did manage to post a small gain but that isn’t a positive even though we own it (see more on gold and the dollar below)....

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