These Lower Lows Equals Flight To Safety
CAMS Weekly View from the Corner – Week ending 5/31/2019
June 3, 2019
For nearly a month now we have been offering developing caution emanating from various markets here in our Weekly Views. As the days have turned to weeks said caution has turned into downside action in risk assets generally. Stocks have been on the front line of risk asset selling.
Within the stock market, defensive areas such as Utilities and Consumer Staples had begun to pick up strength as more risk oriented areas such as Technology and Consumer Discretionary began to weaken.
More recently this has even morphed into some struggling behavior from said defensive areas. This speaks to a significant increase in caution, if not concern, from market participants.
In our previous Weekly View we shared an increased concern coming from the very smart bond market. These increased concerns have turned into a flight to safety.
The 10 Year Treasury bond – something we have chronicled several times since the early fall season of 2018 – was yet again threatening to go lower in its interest rate. Market participants have been pushing this yield lower out of general caution for the broad economic landscape. Our previous View focused on this 10 Year Treasury and we do so again in light of its behavior.
Above is the on-going narrated chart that we have shared since the fall of 2018. In our most recent View we asked if a new low was coming. Various market behaviors were offering this as a possibility and if it did occur would be an additional statement of market caution.
As our updated chart depicts a lower low has indeed occurred. In fact, with the intensity of the dive lower we can reason that market participants are clearly concerned and are fleeing from risk assets and into more safety oriented assets.
This behavior and the intensity of this move speak to significant market concerns.
We do not see this type of behavior from the very smart bond market by accident. Importantly, as depicted in the chart above, this is on-going behavior – meaning the displayed down trend has been consistent dating back to last fall season.
With this, it is not a “one off” if you will whereby the bond market suddenly went into a panic. This fact underlines caution even more and clearly has begun to show up inside the stock market. Caution is warranted per the most important opinion of all which is the markets themselves.
I wish you well…
Director, Market Research & Portfolio Analysis
Portfolio Manager, CAMS Spectrum Portfolio
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