Weekly Commentary – Strategy thoughts on the Fed’s QE exit
The sharp selloff in the bond market will be an opportunity to investors. Many bond funds are now showing losses for the year because of the Federal Reserve tapering off its effort.
But at the same time, the markets which took a hit are now attractive—such as high-yield bonds and high yield stocks.
The bond market selloff has been swift. Yields on the U.S. Treasury 10-year note, which move in the opposite direction of prices, have jumped from 1.6% in mid-May to 2.5%—their highest level in 15 months. By historical standards, yields are still quite low, but the market move has been painful.
Driving these moves has been a rethinking of the future course of Fed policy. With the U.S. economy showing moderate growth, Fed officials have suggested that they could pare back their $85 billion-a-month bond-buying program later this year.
It looks like the Federal Reserve doesn't have to worry too much about the reach for yield anymore.
Due to recovery of U.S. economy, related sector of US economy recovery and high divided stocks will be our focus.
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