Scott Barlow also highlights some of the most remarkable important scientific developments of 2024
In this Market Factors , we describe why equity investors need to follow the U.S. ten-year bond yield, explain why dividend yield is less important than many believe, and take a look at some of the most remarkable important scientific developments of 2024.Morgan Stanley chief investment officer Michael Wilson sees the recent increase in longer-term U.S. bond yields as a potential sign of concern regarding future funding of the country’s massive deficit.
The strategist predicts that the strongly negative correlation between bond yields and equity prices will continue until the ten-year yield falls back below 4.5 per cent. In this high-yield environment, he favours financial, media and entertainment stocks and likes consumer services stocks over consumer goods.
I think the piece is valuable as a reminder that dividend investors have benefitted from generally falling bond yields over the past 42 years – lower fixed income yields make equity dividends more attractive by comparison. The Canadian ten-year bond, however, hit 54 basis points during the pandemic and had no where to go but up. The multi-decade trend of falling yields is over.
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