After the new Fed head delivered a mixed message and refused to indicate where the Federal Reserve is headed with regard to interest-rate policy (despite his message that he has no tolerance for high inflation), we saw the biggest steepening of the Treasury yield curve in three decades (driving short-term interest rates lower and the yield on long bonds much higher).
My fear of “interest rates for longer” — at the foundation of my ursine market view — was underscored.
A higher risk free rate of return (on Treasury notes) means that the present value of equities is diminished, limiting the upside in stocks (and contrary to the optimistic consensus of Wall Street analysts).
Though they likely won’t…. investment strategists should now be lowering their year end S&P targets.
Doug Kass is a world-renowned hedge fund manager with decades of experience and success navigating through some of the most turbulent periods in market history. He is known for his time-tested analytical skills and ability to look past the current noise and herd mentality.
On TheStreet Pro, Kass provides frequent market commentary and investing ideas for active investors throughout each trading day in Doug’s Daily Diary. He also serves as president of Seabreeze Partners Management Inc. Previously, he served as a senior manager at Omega Advisors, a $6 billion investment partnership. He co-authored a book with Ralph Nader and the Center for the Study of Responsive Law called “Citibank: The Ralph Nader Report” and can be found as a guest host on CNBC's "Squawk Box."
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