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The Fed kept rates unchanged but announced a significant reduction in its quantitative tightening program starting in June. Redditors have diverse opinions on its effectiveness and potential impact on inflation and investment strategies.

Redditors Question Change To Fed Policy: Are They &#39;Slowing QT To Prevent A Crash&#39;?

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Powell stated on Tuesday that a prolonged period of restrictive monetary policy may be necessary, refraining from offering explicit guidance on a rate-cutting strategy.

Jerome Powell Back In Hawkish Policy Lane? Why Economists Feel Fed&#39;s &#39;Higher For Longer&#39; Narrative Hasn&#39;t Changed: &#39;Markets Need To Focus On The Fact That...&#39;

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Iran launched a barrage of explosive drones and missiles towards Israel late on Saturday in its first direct attack on Israeli soil, prompting concerns of a significant escalation. Sirens blared in Israel, as reported by Reuters, and distant booming sounds were heard, likely from the interception of the drones.

3 Safe-Haven ETFs to Gain on Middle East Crisis

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The Federal Reserve&#8217;s recent policy decision kept interest rates unchanged, continuing since July 2023. However, it announced a significant reduction in its quantitative tightening (QT) program, <a href="https://www.benzinga.com/federal-reserve">starting in June</a>. 
QT involves selling off assets to decrease money supply and raise interest rates. This move follows massive bond purchases during the pandemic, which suppressed interest rates. While QT can help control inflation, it also reduces liquidity in the economy and can lead to higher interest rates and tighter monetary conditions. 
The Fed aims to avoid a repeat of the 2019 &#8220;repo crisis&#8221; caused by QT, and plans to scale back QT to $25 billion, more than half of its current rate.
Related: <a href="https://www.benzinga.com/economics/macro-economic-events/24/05/38584705/federal-reserve-takes-cautious-stand-on-inflation-powell-signals-preference-for-r">Federal Reserve Takes Cautious Stand On Inflation, Powell Signals Preference For Rate Cuts Over Hikes</a>
<h1 class="wp-block-heading">Redditors Question the Effectiveness of Fed&#8217;s Decision</h1>
Reddit discussions on r/stocks provided valuable insights into the Federal Reserve&#8217;s recent decision to reduce quantitative tightening (QT) and its potential impact on inflation and the economy. 
Redditors expressed diverse opinions, ranging from concerns about inflation to the Fed&#8217;s motives and the broader economic implications.
Redditors like jigglyjohnson13 questioned the effectiveness of the Fed&#8217;s decision, citing concerns about inflation and the M2 money supply. They suggested that the Fed may be influenced by the theory that COVID-19 relief caused an explosion in M2, making it challenging to bring inflation down.
Others, such as 95Daphne and goodbodha, believe that the Fed&#8217;s decision is driven by the need to maintain stability in the banking system. They argue that the Fed is trying to prevent a financial accident, similar to what happened in the past, and ensure that banks have sufficient reserves.
Some, like Malamonga1 and Invest0rnoob1, see the Fed&#8217;s decision as a means to stimulate the economy. They suggest that while the decision may not directly address inflation, it could prevent a crash and support banks facing challenges.
<blockquote class="wp-block-quote">&#8220;I think the economy is doing worse than they are admitting. It's mostly being propped up by government spending. They are slowing QT to prevent a crash.&#8221;
<cite>Redditor <a href="https://www.reddit.com/r/stocks/comments/1chwj1e/comment/l25cvuh/?utm_source=share&amp;utm_medium=web3x&amp;utm_name=web3xcss&amp;utm_term=1&amp;utm_content=share_button">Invest0rnoob1</a></cite></blockquote>
<h1 class="wp-block-heading">Impact On Investment Strategies</h1>
Redditors like fairlyaveragetrader believe the Fed&#8217;s decision could impact investment strategies. They suggest the decision could make long-term bonds more attractive and lead to lower rates over the next 18 months, affecting stock investments and overall market outlook.
<blockquote class="wp-block-quote">&#8220;Inflation is really only being pushed by two things, housing and auto insurance and neither of those are responsive to QT. What the Fed did today is tell you to buy bonds. The fact they are slowing down the selling is going to make the long end more attractive. Rates overall, over the next 18 months, likely to fall.&#8221;
<cite>Redditor <a href="https://www.reddit.com/r/stocks/comments/1chwj1e/comment/l25wz4a/?utm_source=share&amp;utm_medium=web3x&amp;utm_name=web3xcss&amp;utm_term=1&amp;utm_content=share_button">fairlyaveragetrader</a></cite></blockquote>
ETFs such as the iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>), the Vanguard Long-Term Treasury ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/VGLT#NASDAQ">VGLT</a>), and the SPDR Portfolio Long Term Treasury ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPTL#NYSE">SPTL</a>) provide exposure to long-term Treasury bonds. The iShares 7-10 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NASDAQ">IEF</a>) is a popular way to get exposure to medium-to-long-term Treasury bonds.
The diverse opinions expressed by Redditors highlight the complexity of the Federal Reserve&#8217;s decision-making process and its potential impact on various aspects of the economy. 
Investors should consider these perspectives when analyzing the implications of the Fed&#8217;s decision on their investment strategies.
Read Next: <a href="https://www.benzinga.com/news/earnings/24/05/38593416/wall-street-inches-up-post-fed-chipmakers-rebound-gold-crude-falter-whats-driving-market-thursday">Wall Street Inches Up After Powell&#8217;s Inflation Remarks; Chipmakers Rebound; Gold, Crude Falter: What&#8217;s Driving Markets Thursday?</a>
Illustration created using artificial intelligence via MidJourney.

Redditors Question Change To Fed Policy: Are They 'Slowing QT To Prevent A Crash'?

Federal Reserve&nbsp;Chair&nbsp;Jerome Powell&nbsp;stated on Tuesday that a prolonged period of&nbsp;<a target="_blank" href="https://www.benzinga.com/etfs/broad-u-s-equity-etfs/24/04/38278182/powell-delays-fed-rate-cuts-we-need-greater-confidence-in-inflation-2-year-yields-spik" rel="noreferrer noopener">restrictive monetary policy</a>&nbsp;may be necessary, refraining from offering explicit guidance on a rate-cutting strategy. Economists interpreted this as a clear indication that the central bank is likely to maintain a &#8220;higher for longer&#8221; approach.
The Hawkish Schiff: Economist&nbsp;Peter Schiff, in a post on X (formerly Twitter), challenged Powell&#8217;s characterization of the current monetary policy as restrictive, asserting that it remains loose. Schiff advocated for rate hikes, expressing concerns that prolonged loose policy would exacerbate inflationary pressures.
&#8220;The longer the Fed maintains its current policy, the further away from 2% inflation will rise,&#8221; he said.
Schiff&#8217;s remarks come against the backdrop of a robust economy and strong job growth.&nbsp;
However, some economists, like Nobel laureate&nbsp;Paul Krugman, argue that consumer price inflation may not accurately reflect economic conditions, suggesting alternative measures such as the harmonized index of consumer prices, which excludes the owner-equivalent rent.
See Also:&nbsp;<a target="_blank" href="https://www.benzinga.com/money/best-inflation-stocks" rel="noreferrer noopener">Best Inflation Stocks</a>
Higher For Longer: Jamie Cox, Managing Partner at Harris Financial Group, said Powell picked a bad timing to have a &#8220;communication problem on the path of rates this year.&#8221;
The economist, however, does not see the need for rate hikes, given the strong labor market, unaffected and consumer spending, The typical consequences of hiking rates weren&#8217;t apparent in the economy, he said. 
The economist also had a piece of advice for investors. &#8220;Markets need to focus on the fact that rates are sufficiently restrictive, instead of how many cuts are in the pipeline,&#8221; he said.
LPL Chief Economist Jeffrey Roach said Powell&#8217;s speech underlined his lack of confidence in inflation dynamics. &#8220;The Fed will likely stay on hold for longer than originally planned,&#8221; he said.
The central bank chief&#8217;s Q&amp;A session showed that supply constraints were continuing to add to inflationary pressures and this could make it hard for the Fed, Roach said. 
The bond market reacted to his comments, with investors now slowly coming to terms with the possibility of the central bank remaining on hold for most of this year, he said, adding, &#8220;Investors are reassessing risk appetite as Chair Powell is not confident that inflation is cooling enough for rate cuts.
LPL Chief Global Strategist Quincy Krosby said Powell was entering the &#8220;hawkish policy lane.&#8221; The Fed Chair essentially implied that the downward trajectory of inflation has essentially stalled, the analyst said.
&#8220;Moreover, he made it clear &#8211; rather than his more ambiguous stance regarding a rate easing timetable &#8211; that the &#8216;higher for longer&#8217; narrative remains intact,&#8221; Krosby said.
‌&#8221;This was unfriendly for equity markets, but markets got the message.&#8221;
The 10-year bond yield edged higher and is approaching the 4.7% level, which it previously hit in early November 2023. 
The major index futures are trading lower, pointing to another lackluster session on Wednesday.
The iShares 7-10 Year Treasury Bond ETF&nbsp;(NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NASDAQ">IEF</a>) settled Tuesday&#8217;s session down 0.39% at $91.36 and the SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>) fell 0.18% before closing at $503.53, according to <a href="https://benzinga.grsm.io/lxquj26b2sag">Benzinga Pro data.</a>
Read Next: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/04/38085675/were-fd-says-rich-dad-poor-dad-author-robert-kiyosaki-because-fed-chair-powell-fina">&#8216;We&#8217;re F&#8217;d,&#8217; Says &#8216;Rich Dad Poor Dad&#8217; Author Robert Kiyosaki Because Fed Chair Powell &#8216;Finally Admitted Inflation Is Winning&#8217;</a>
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Jerome Powell Back In Hawkish Policy Lane? Why Economists Feel Fed's 'Higher For Longer' Narrative Hasn't Changed: 'Markets Need To Focus On The Fact That...'

Iran launched a barrage of explosive drones and missiles towards Israel late on Saturday in its first direct attack on Israeli soil, prompting concerns of a significant escalation. Sirens blared in Israel, as reported by Reuters, and distant booming sounds were heard, likely from the interception of the drones.
Israel said it identified 300 &quot;threats of various types&quot; and eliminated &quot;99%&quot; of those bound for Israeli soil, according to an update from an Israel Defense Forces spokesperson, as quoted on CNBC. Iran&#39;s Revolutionary Guards seized a cargo ship in the Strait of Hormuz on Saturday, saying the vessel, associated with Israel, prompted heightened alert levels due to the possibility of a direct Iranian attack,
This could escalate a decades-old standoff between the two regional adversaries. Notably, the Gaza war between Israel and Hamas, now entering its seventh month, has heightened tensions in the region, extending to conflicts with Lebanon and Syria. Additionally, long-range attacks targeting Israeli interests have originated from Yemen and Iraq.
<h3>Market Impact</h3>
Investors are likely to take this clash seriously and rush toward fear-induced selling. The sudden rise of chaos in the market brightened the appeal for safe haven assets. Volatility ETFs which track the implied volatility of the market also surged thanks to the massacre in the stock market. iPath Series B S&amp;P 500 VIX Short-Term Futures ETN (BATS: <a class="ticker" href="https://www.benzinga.com/stock/vxx#BATS">VXX</a>) has added about 4.2% past week and rose 8.8% on Friday and advanced about 1% after hours on Apr 12.
Below, we highlight a few of the biggest gainers from the latest sell-off in the stock market. Also, these ETFs may continue to shine should tensions persist in the global economy in the near term.
<h3>Gold</h3>
Gold is often viewed as a hedge against market risk. The metal has seen some strength lately thanks to this market turmoil. Gold bullion ETF SPDR Gold Trust (ARCA:GLD) has gained 0.4% in the past five days. It added 0.14% in after hours on Apr 12.
<h3>Long-Term U.S. Treasury</h3>
U.S. 10-year benchmark treasury yield slumped to 4.50% on Apr 12, 2024, down from 4.56% recorded on Apr 11 despite talks of higher-for-longer rates due to rise in volatility in the markets. Notably, U.S. Treasuries are also perceived as risk-free asset class which is why iShares Barclays 20 Year Treasury Bond Fund (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/tlt#NASDAQ">TLT</a>) and iShares Barclays 7-10 Year Treasury Bond Fund (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/ief#NASDAQ">IEF</a>) added about 0.5% and 0.4% on Apr 12, 2024.
<h3>U.S. Dollar</h3>
The U.S. dollar is often viewed as a safe haven currency due to their strong liquidity and stable political systems. With the Fed likely to keep rates higher for longer due to sticky inflation, the U.S. dollar is likely to remain strong over the medium term. Invesco DB US Dollar Index Bullish Fund (ARCA:UUP) can thus be played here.
<h3>Bottom Line</h3>
Although we do not expect this bearish trend to continue for long especially in the United States, which has a strong trend underneath, the upheaval in the stock market may persist for a week or so courtesy of the gloomy global backdrop and an oil price rally (due to crisis in the oil-rich Middle East). However, as the earnings season unfolds, this fluffy market should take a solid shape and decide on the fate of several asset classes and sectors.
<a href="https://www.zacks.com/stock/news/2255601/3-safe-haven-etfs-to-gain-on-middle-east-crisis?cid=CS-BENZ-FT-etf_news_and_commentary-2255601">To read this article on Zacks.com click here.</a>

U.S. Treasury yields have reached their highest levels since mid-November 2023, driven by a mix of economic resilience, persistent fiscal spending <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/04/38186082/this-puts-the-fed-in-quite-a-tricky-position-7-economists-weigh-in-on-march-inflati">and resuming inflationary pressures. </a>
These factors are steering the market&#8217;s expectations away from earlier predictions of imminent Federal Reserve rate cuts, significantly impacting the cost of issuing U.S. government debt.
<h1 class="wp-block-heading">Treasury Bond ETFs Fall To Mid-November 2023 Lows</h1>
On Monday, the yield on the 10-year Treasury note hit 4.61%, a peak not observed since Nov. 14, 2023. 
This represents a substantial increase of approximately 40 basis points since the beginning of the month.
Additionally, the daily chart for the 10-year Treasury yield shows the 50-day and 200-day moving averages have created a &#8220;golden cross&#8221; pattern, signaling the confirmation of an uptrend and the possibility of further increases, with the next resistance level now projected at 5%.
Concurrently, bond ETFs have experienced notable declines. The iShares 7-10 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NASDAQ">IEF</a>) fell to its lowest level since Nov. 13, 2023, reflecting a 5.6% decrease since its February 2024 high. 
The iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) has seen an even steeper drop, falling more than 11% from its January peak.
<h1 class="wp-block-heading">Chart: US 10-Year Yields For Golden-Cross Pattern</h1>
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="495" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/15163420/image-80-1024x495.png" alt="" class="wp-image-292683" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/15163420/image-80-1024x495.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/15163420/image-80-300x145.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/15163420/image-80-768x372.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/15163420/image-80-1536x743.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/15163420/image-80.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
<h1 class="wp-block-heading">Hot Economic Data Fuels Speculation On Fewer And Delayed Fed Rate Cuts</h1>
Recent robust U.S. economic indicators have contributed to a shift in market expectations regarding the Federal Reserve&#8217;s actions. 
March 2024 saw U.S. retail sales jump unexpectedly by 0.7%, against <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/04/38253316/us-retail-sales-boom-well-above-forecasts-rise-4-on-the-year-blowout-report-economi">a forecast of 0.3%</a>. This comes on the heels of higher-than-expected inflation figures and a tighter-than-expected jobs report earlier in the month.
Originally, markets had anticipated the Fed to start reducing rates in June 2024, with a total of three cuts throughout the year. However, current speculations suggest the Fed might only implement a single rate cut this year. 
Traders now see only a 20% probability of a June rate cut and the anticipated overall easing for 2024 stands at around 40 basis points, indicating fewer than two quarter-percentage-point cuts.
<h1 class="wp-block-heading">Analysts Reassess Fed&#8217;s Rate Path: UBS Sees Fed Hiking Again</h1>
Analysts have quickly adjusted their forecasts on Fed interest rates in response to this shift in economic signals. 
A significant caution came from UBS Group AG strategists Jonathan Pingle and Bhanu Baweja, who highlighted the risk of inflation not decreasing to the Fed&#8217;s target, potentially necessitating a return to rate hikes and triggering a significant downturn in bonds and stocks.
As reported by <a href="https://www.bloomberg.com/news/articles/2024-04-15/fed-hiking-rates-to-6-5-is-real-risk-for-ubs-strategists?srnd=homepage-americas&amp;sref=TBDibEcD">Bloomberg</a>, they warned of a possible return to rate hikes if inflation remains above 2.5%, predicting that the Federal Funds rate could reach 6.5% by mid-next year.
The UBS team described a &#8220;no-landing scenario&#8221; where further rate hikes could lead to a significant flattening of the U.S. Treasury curve and a potential 10%-15% decline in stock market values. 
They also forecasted wider credit spreads and a considerable adjustment in market multiples, cautioning that investors are beginning to worry about an overheated economy that could maintain high inflation level.
Photo: Funtap on Shutterstock

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Bond Yields Surge To 6-Month Highs As Likelihood Of No-Landing Scenario Increases: UBS Warns Of Potential Fed Rate Hikes To 6.5%

A bond trader has just placed a record-breaking single bet by going long on December 2024 <a href="https://www.benzinga.com/topic/interest-rates">short-term interest rate futures. </a>
This strategy will pay off if the Federal Reserve cuts interest rates at least three times by the end of the year, a scenario that is not yet fully priced into the market following recent robust economic data and higher-than-expected inflation figures.
The Secured Overnight Financing Rate (SOFR) futures — the tool used to assess market wagers on Fed interest rates — suggest that traders are anticipating a total of 68 basis points in rate cuts by the end of the year.
What Happened: A significant transaction involving 75,000 December 2024 SOFR futures contracts through a block trade occurred shortly after 9 a.m. New York time on Tuesday, <a href="https://www.bloomberg.com/news/articles/2024-04-09/bond-trader-places-record-futures-bet-on-eve-of-inflation-data?srnd=homepage-americas&amp;sref=TBDibEcD">according</a> to Bloomberg. 
The CME Group verified this as the most substantial transaction for this product ever recorded, the report said. Block trades are substantial, privately negotiated transactions conducted at a single price.
The block trade for the December 2024 SOFR futures was executed at 95.320. 
<h2 class="wp-block-heading">Chart: Bond Whale Bets Big On Fed Rate Cuts </h2>
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="495" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/09161856/image-27-1024x495.png" alt="" class="wp-image-284602" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/09161856/image-27-1024x495.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/09161856/image-27-300x145.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/09161856/image-27-768x372.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/09161856/image-27-1536x743.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/09161856/image-27.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
Why It Matters: The value of these futures could significantly increase if the March consumer price index data due Wednesday morning indicates lower-than-anticipated inflation. 
Such an outcome could lead to renewed expectations that the Federal Reserve will enact at least three rate cuts this year. 
Additionally, the trade might have been executed to close out a short position, thereby minimizing risk in anticipation of the upcoming data release.
On the other hand, if the inflation figures are higher than expected, the possibility of witnessing higher-for-longer interest rates increases, which would further reduce market expectations for Fed rate cuts. Under such circumstances, the value of the December 2024 SOFR futures would decline.
Market Reactions: Treasury yields slightly fell Tuesday ahead of Wednesday&#8217;s inflation report. The iShares 1-3 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SHY#NASDAQ">SHY</a>) inched 0.1% higher, the iShares 7-10 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NASDAQ">IEF</a>) rose 0.4% and the iShares 20+ Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) rallied 0.9%. 
Read now: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/04/38169708/traders-brace-for-inflation-data-june-rate-cut-hopes-hang-by-thread-10-etfs-that-co">Traders Brace For Inflation Data, June Rate Cut Hopes Hang By Thread: 10 ETFs That Could Be Volatile Wednesday</a>
Federal Reserve illustration created using artificial intelligence via MidJourney.

iShares Trust Barclays 1-3 Year Treasury Bond Fund

Bond Trader Places Largest-Ever Bet On Fed Rate Cuts In 2024 Ahead Of March Inflation Report

In March, the U.S. labor market surged beyond predictions, with 303,000 nonfarm payrolls added, surpassing expectations of 212,000. This marked the highest figure since May 2023 and accompanied a slight decrease in the <a href="https://www.benzinga.com//node/38108835">unemployment rate from 3.9% to 3.8%</a>. 
We covered it first here: <a href="https://www.benzinga.com//node/38108835">US Labor Market Heats Up In March: Payrolls Grow By 303,000, Highest In 10 Months, Dampen June Rate Cut Hopes</a>
The robust report dashed hopes for Federal Reserve rate cuts, exacerbated by hawkish comments from Fed speakers, further dampening investor expectations.
The unexpected decrease in the unemployment rate from two-year highs and the anticipated rise in earnings signaled a tight labor market also reinforces the Federal Reserve&#8217;s stance against immediate interest rate cuts.
<h2 class="wp-block-heading">Economists Insights: March Jobs Report Dashed Hopes Of Rate Cut</h2>
The March jobs report has elicited diverse responses from economists and market analysts. Let&#8217;s delve into their viewpoints, capturing their original statements or key phrases to provide a comprehensive insight into the implications.
Joseph Brusuelas, Chief Economist at RSM US LLP, recognized as the best rate forecaster of 2023 by Bloomberg, shed light on the policy implications of the report. With wage growth slowing accompanying topline employment increases, Brusuelas sees the Fed relaxing a restrictive policy rate, given the PCE deflator continues to improve.
<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"> 
<div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="500" data-dnt="true">US Jobs Report Policy Implications: With wage growth slowing to 4.1% from 4.3% while topline employment increased at 303K-276K 3 mo avg &amp; 244K 6mo avg-the Fed can relax a restrictive policy rate pending ongoing improvement in the PCE deflator.
&mdash; Joseph Brusuelas (@joebrusuelas) <a href="https://twitter.com/joebrusuelas/status/1776231519939408025?ref_src=twsrc%5Etfw">April 5, 2024</a></blockquote>
<script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script></div>
</figure>
In his review note, Brusuelas emphasized the significance of acknowledging the increase in labor supply and rising productivity when formulating policies to avert unnecessary economic slowdowns and unemployment spikes. 
The March jobs report underscores &#8220;American Exceptionalism&#8221;, showcasing the nation&#8217;s superior economic performance compared to its counterparts, with sustained job gains averaging 276,000 over the past three months. 
This trend aligns with a favorable economic condition known as the &#8220;3-2 condition,&#8221; characterized by low unemployment rates and stable inflation, fostering conditions for robust growth and price stability.
According to Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, March&#8217;s &#8220;blowout jobs numbers&#8221; indicate sustained economic strength, suggesting that consumer spending is likely to remain stable in the short term.
However, &#8220;this good news is bad news for the bond market&#8221; he said. It reduces the likelihood of earlier and more frequent rate cuts by the Federal Reserve, potentially delaying the first cut until July.
Nonetheless, this situation may bode well for the stock market, given that investor focus on consumer spending and corporate profits could drive stock prices higher.
Rob Swanke, senior equity strategist for Commonwealth Financial Network sees rate cut expectations in June remaining at around 60%. &#8220;Participation rose, and average hours worked rose which could help boost real income and spending in the economy without driving up inflation,&#8221; he said. Overall, Swanke sees the report increasing confidence in the economy.
Jeffrey Roach, chief economist at LPL Financial, attributed the strong job growth in the construction sector to &#8220;the demand for new homes amid low inventory.&#8221; According to Roach, although the likelihood of a Federal Reserve rate cut in June exceeds 50%, traders should consider the prospect of the European Central Bank cutting rates before the Fed. Roach advises investors to closely monitor fluctuations in the dollar during this period of uncertainty.
Quincy Krosby, chief global strategist for LPL Financial sees the numbers complicating the Fed&#8217;s goals. While headline numbers present challenges, average hourly wages provide some clarity, per Krosby. 
Despite the unemployment rate decreasing to 3.8%, the slight decline in hourly wages, crucial for assessing inflationary trends, has led to positive equity futures but upward movements in the 2-year Treasury yields and 10-year Treasury yields. Krosby noted the report bolsters the Fed&#8217;s position, highlighting that data showing a decline in inflation must accelerate to be impactful.
<h2 class="wp-block-heading">Market Reaction: Stocks And Dollar Gained, Bonds Fell</h2>
Treasury yields soared, with the 10-year yield surging above 4.35% and bonds fell. The&nbsp;iShares 20+ Year Treasury Bond ETF&nbsp;(NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) was down&nbsp;0.95% while the iShares 7-10 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NASDAQ">IEF</a>) was down 0.44% by 10:50 AM ET on Friday.
U.S. equity, as represented by the&nbsp;SPDR S&amp;P 500 ETF Trust&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>) was up 0.85% while the tech-focused&nbsp;Invesco QQQ Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NYSE">QQQ</a>) had gained 1.14% by 10:50 AM ET.
The U.S. dollar gained, with the Invesco DB US Dollar Index Bullish Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>) up 0.18%.
Read Next: <a href="https://www.benzinga.com/fintech/24/04/38110804/top-10-us-corporate-bonds-by-market-performance-in-2024-april-update">Top 10 US Corporate Bonds By Market Performance In 2024: April Update</a>
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March's 'Blowout' Jobs Numbers Underscore 'American Exceptionalism': 5 Economists Analyze 2024 Rate Cut Implications

The yields on U.S. Treasury notes have almost entirely retraced their surge following the release of the hotter-than-expected <a href="https://www.benzinga.com/markets/equities/24/02/37156844/retail-sales-sink-in-january-manufacturing-indicators-improve-jobless-claims-fall-thursdays-econ">January inflation report</a>. 
This indicates a swift shift in investor sentiment amidst conflicting economic indicators.
The 10-year Treasury note saw a decrease to 4.21% during Thursday morning&#8217;s trading in New York. This marks a five basis point drop after a six basis point decline the previous day. This movement erased the gains seen in the wake of the inflation data. Yields are back to their pre-report levels of approximately 4.17-4.18%.
Despite a higher-than-expected inflation rate for January, the anticipated impact on longer-dated maturities was short-lived. The 30-year Treasury note yield returned to 4.4%, aligning exactly with its position before the Consumer Price Index (CPI) announcement. 
However, a slight uptick remains in the two-year note, which, despite falling to 4.54%, is still about 8 basis points above its pre-inflation report trading figures.
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="493" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/02/15104613/image-34-1024x493.png" alt="" class="wp-image-217625" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/02/15104613/image-34-1024x493.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/02/15104613/image-34-300x144.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/02/15104613/image-34-768x370.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/02/15104613/image-34-1536x739.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/02/15104613/image-34.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
Retail Sales Data Prompts Fed Cut Bets: The probability of Fed rate cuts in May and June 2024 has increased.
In January, retail sales contracted by 0.8% from a month earlier, marking a sharp reversal from December&#8217;s 0.4% surge. It is the biggest drop in retail sales since the bank crisis of March last year. On an annual basis, retail sales rose 0.6%, reflecting a sharp decline from December&#8217;s 5.3% annual rate. 
This has led traders to anticipate earlier rate reductions, with a June rate cut now seen as almost certain, boasting an 86% probability, while a downward adjustment in the fed funds rate by July is nearly fully anticipated by market participants. 
Money markets are currently forecasting a total of 105 basis points in rate cuts by the end of 2024, according to CME Group&#8217;s Fed Watch. 
The bond market responded positively to these developments, with rallies on Wednesday and continued strength into early Thursday trading as yields softened. 
Notably, the iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) and the iShares 7-10 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NASDAQ">IEF</a>) both experienced gains, opening 0.9% and 0.5% higher on Thursday. 
Read Now: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/02/37139816/2008-big-short-oracle-burry-bets-big-on-chinese-giants-backs-google-amazons-ai-wave">2008 &#8216;Big Short&#8217; Oracle Burry Bets Big On Chinese Giants, Backs Google, Amazon&#8217;s AI Wave</a>
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New ETFs

Retail Sales

Treasury Yields Almost Fully Erase Post-Inflation Data Surge As Poor Retail Sales Reignite Fed Cut Hopes

<h3>Let&#39;s Rewind</h3>
2022 and 2023 were hectic - war, bank crises, and bear markets.
Inflation was still running rampant - with the core PCE having just peaked at +6.4% in February 2022. These consistent out-of-control inflation reports caused the Federal Reserve to take action by&nbsp;doing the only thing they know how to do -&nbsp;raise interest rates.
Starting in March 2022, the Fed raised rates at the fastest speed in modern history - from essentially 0% to 4.75% in only 12 months. As you can imagine, this rapid increase in interest rates caused bond prices to go into a free fall.
<div>
For those of you unaware, bond prices move inversely with interest rates.
Think about it like this - if you&#39;re an investor looking to generate fixed income inside of your portfolio, buying bonds might seem like a&nbsp;good idea.
However, as the months tick by and interest rates continue to rise, the value of the older bonds begins to fall -&nbsp;who wants to own a bond paying 3% ... if you can own a bond paying 5%.
Now, after nearly two years of consistent interest rate hikes, it seems like the Federal Reserve might be taking a break -&nbsp;at least that&#39;s what the market is hoping for.
Since mid-October, the price of the iShares 7-10 Year Treasury Bond ETF (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/ief#NASDAQ">IEF</a>) has begun to make a comeback, having traded up +8.9%. With inflation now showing consistent contraction, the market is not only pricing in a Federal Reserve &quot;pause,&quot; but also interest rate cuts in 2024.&nbsp;
<h3>Fast Forward</h3>
Looking ahead to 2024 and 2025 - investors believe there are several reasons to be excited about adding core aggregate bond exposure to their portfolios. Bonds help provide stability in a multi-asset portfolio - coupon payments generate income, and bond prices tend to rise when economic growth slows.
Considering the slowing economic climate and current interest rates, bonds might be able to deliver on both of those fronts in 2024.
Aross many sectors of the bond market, yields have reached highs not seen since 2007. For example, the yield on a 5-year Treasury Bond is +241&nbsp;bps above the dividend yield of the S&amp;P 500 (ARCA:SPY) at the moment. The only negative yielding debt left in the entire world is in Japan.&nbsp;
I think strong performance will begin in 2024. We could experience modest price appreciation as yields fall while paired with a very attractive bond yield. Economic growth should continue to slow, inflation will continue to cool, and central banks will begin to reverse their rate-hiking cycles.
Choosing bonds within the 3-10 year maturity range offers investors an attractive yield while being less exposed to longer-term risks regarding government deficits.
<h3>My Personal Choice</h3>
The&nbsp;Neos Enhanced Income Aggregate Bond ETF (ARCA:BNDI)&nbsp;allows me to capture 2-2.5% more income per year while adding negligible risk to my well-diversified portfolio.&nbsp;
According to the <a href="https://neosfunds.com/wp-content/uploads/BNDI-Prospectus.pdf">prospectus</a>, the Neos Enhanced Income Aggregate Bond ETF seeks to achieve its investment objective of generating monthly income in a tax-efficient manner by...
<blockquote>&quot;(i) Investing 80% or more of its assets in bonds or ETFs that ... obtain exposure to the performance of the US Aggregate Bond market and (ii) selling and purchasing S&amp;P 500 Index put options to generate income to the Fund beyond what is received from the Underlying Investments.&quot;
</blockquote>
The prospectus also clearly states their intention to hold US Treasury bonds, government-related bonds, corporate bonds, mortgage-backed pass-through securities, commercial mortgage-backed securities and asset-backed securities to obtain exposure to the US Aggregate Bond market.
After looking at their <a href="https://neosfunds.com/bndi/#holdings">holdings</a> (as of 12/27/23), I&#39;ve confirmed this is the case - as the vast majority of the Fund&#39;s assets are invested evenly between the Vanguard Total Bond Market Index Fund ETF (<a href="https://www.benzinga.com/quote/BND">BND</a>), and the iShares Core US Aggregate Bond ETF (<a href="https://www.benzinga.com/quote/AGG">AGG</a>).&nbsp;
Their holdings also show us that their fund managers are buying put options on the S&amp;P 500 Index with a strike price about 9.5% below the current price of the S&amp;P 500 Index (4,781&nbsp;at the time of writing) - while simultaneously selling put option contracts about 5.5% below the current price of the S&amp;P 500 Index.
It&#39;s important to note that these put option contracts have expiration dates roughly two weeks out from the time of purchase.
Year-to-date, BNDI has paid $2.52 per share to their investors. This $2.52 figure roughly equates to the 5.53% distribution yield <a href="https://neosfunds.com/bndi/">shown here on their website</a>.&nbsp;
When taking into consideration the forward dividend yield of the underlying investments inside of BNDI as shared earlier - the fund managers are generating +239&nbsp;bps of additional yield on top of the already 3.14% yield produced by the fund&#39;s underlying investments.
They&#39;re doing this while taking on negligible risk, as shown on <a href="https://neosfunds.com/monthly-income-etfs/">this page of their website</a>.&nbsp;
If you compare Scenario 1: Hypothetical core asset allocation&#39;s portfolio yield and 1-yr standard deviation to Scenario 3&#39;s - you&#39;ll see that when you replace traditional fixed income securities with BNDI the portfolio&#39;s overall yield increased dramatically while 1-yr standard deviations remains nearly the same.
That&#39;s the secret sauce here with BNDI - when owned inside of a well-diversified portfolio, investors can expect heightened portfolio yield with near-identical risk.
<h3>Risks</h3>
As with all investment ideas, this one doesn&#39;t come without its risks. In my opinion, there are two main risk factors at play here - the Fed&nbsp;not&nbsp;cutting rates in 2024 and BNDI&#39;s put option strategy.
According to a&nbsp;<a href="https://privatebank.jpmorgan.com/nam/en/insights/latest-and-featured/outlook#:~:text=As%20we%20head%20into%202024,becoming%20more%20accessible%20to%20investors">recent report</a>&nbsp;shared with JPMorgan&#39;s private banking clients, Wall Street is assuming a +12% increase in bond prices per -1% cut in interest rates. Of course, these are all assumptions and nothing is guaranteed.
If the Fed does&nbsp;not&nbsp;cut interest rates in 2024 and instead holds steady throughout the year, BNDI would likely trade sideways - forcing investors to depend on the Fund&#39;s put option strategy and the existing yield of its underlying investments to generate returns for their portfolios.
If you&#39;re an income-focused investor, this outcome might not be a bad scenario for you. If you&#39;re looking for both price appreciation&nbsp;and&nbsp;yield, this outcome would be disappointing.
The second risk factor is their put option strategy - leaving the fund to be on the hook for paying out against the option contracts they&#39;ve sold. Considering the Fund managers&#39; backgrounds in options-based ETFs, this is something I&#39;m not worried about. This is the same leadership team successfully executing upon both the (<a href="https://www.benzinga.com/quote/SPYI">SPYI</a>) and (<a href="https://www.benzinga.com/quote/CSHI">CSHI</a>) ETFs - one of the main reasons I&#39;m interested in this &quot;hidden gem&quot; ETF in the first place.
Statistically speaking, this put option strategy going sour would be a Black Swan event of sorts. To learn more about this put option strategy, feel free to <a href="https://www.benzinga.com/23/09/34870903/cshi-the-options-based-cash-alternative-everyone-needs-to-know-about-right-now">read&nbsp;this analysis&nbsp;on CSHI</a> which uses a similar, but slightly more conservative, strategy.
<h3>In Summary</h3>
2022 and 2023 were quite hectic for the bond market as investors were forced to continually discount the price of bonds to offset increasing interest rates. However, 2024 is shaping up to be a year that could catalyze both price appreciation while locking in heightened rates.
The Neos Enhanced Income Aggregate Bond ETF is how I plan to play this move - not only will I be experiencing possible price appreciation given their fund&#39;s underlying assets with heightened rates, but I&#39;ll also be earning +2.2% more in income given their put option strategy while taking on very little additional risk.
</div>
This article is from an external contributor. It does not represent Benzinga&#39;s reporting and has not been edited for content or accuracy.

BNDI: 2024's Hidden Gem Bond ETF That Produces 2% Additional Income While Maintaining A Similar Risk Profile

Russia launched an unprecedented aerial attack on Ukraine, firing 122 missiles and deploying numerous drones, resulting in the tragic death of <a href="https://www.benzinga.com/topic/russia-ukraine-war">at least 22 civilians</a>. 
Ukrainian officials have <a href="https://www.cbsnews.com/news/ukraine-russia-most-massive-aerial-attack/">described</a> it as the most extensive aerial barrage since Russia&#8217;s full-scale invasion in February 2022.
The Ukrainian air force claims to have intercepted most of the ballistic and cruise missiles, showcasing the country&#8217;s defense capabilities in the face of the relentless assault. 
See Also: <a href="https://www.benzinga.com/news/23/12/36374438/trump-putin-friendship-fiona-hill-reveals-putin-has-trumps-number-and-still-views-him-as-an-asset">Trump-Putin Friendship? Fiona Hill Reveals Putin &#8216;Has Trump&#8217;s Number&#8217; And Still Views Him &#8216;As An Asset&#8217;</a>
President Volodymyr Zelenskyy highlighted the diverse array of weapons used by Russia, including ballistic and cruise missiles, underlining the severity of the attack.
Notably, this marks a significant escalation compared to previous assaults, with the Ukrainian Air Force reporting that the last major attack involved 96 missiles in November 2022. The severity of the current situation raises concerns about the potential economic impact on global markets.
Ukrainian Air Force spokesman Yurii Ihnat noted that Russia seemingly utilized all available weaponry in this latest assault. As the conflict intensifies, investors are likely to turn their attention to traditional safe-haven assets (i.e., gold and government bonds). They&#8217;re also closely monitoring the performance of defense and energy stocks:
<ul>
<li>The SPDR Gold Trust ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>) </li>
<li>The iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>)</li>
<li>The iShares 7-10 Year Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NYSE">IEF</a>) </li>
<li>The SPDR Bloomberg 1-3 Month T-Bill ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BIL#NYSE">BIL</a>) </li>
<li>The iShares U.S. Aerospace &amp; Defense ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ITA#NYSE">ITA</a>) </li>
<li>And the Energy Select Sector SPDR ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLE#NYSE">XLE</a>) </li>
</ul>
The unfolding geopolitical situation underscores the inherent uncertainties in the market. Investors are grappling with the potential consequences of heightened hostilities between Russia and Ukraine. Market participants are advised to stay vigilant and responsive to evolving geopolitical developments.
Now Read: <a href="https://www.benzinga.com/news/23/12/36380487/experts-warn-russia-china-forming-military-alliance-to-counter-us-dominance-would-present-the-united">Experts Warn Russia, China Forming Military Alliance &#8216;Would Present The United States With A Threat Unlike Any It Has Confronted&#8217;</a>

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iShares Dow Jones US Aerospace & Defense Index Fund

Russia's Biggest Ukrainian Attack To Date: Unpacking Latest  Missile, Drone Salvo

For the first quarter of 2024, JPMorgan Chase &amp; Co (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/JPM#NYSE">JPM</a>) is for overweight U.S. equity, Japanese equity, U.S. Treasury and high-yield corporate debt. The company said &#8220;cash returns are <a href="https://www.benzinga.com/markets/equities/23/11/35614060/warren-buffett-led-berkshire-hathways-ginormous-157b-cash-pile-is-nearing-levels-held-by-one-of-">set to fall</a>&#8221; and the U.S. stock market would &#8220;likely see the S&amp;P 500 test the 5,000 l<a href="https://www.benzinga.com/news/23/12/36229445/amazon-and-alphabet-top-picks-for-2024-jpmorgan-bets-on-continued-mega-cap-tech-rally">evel in 2024</a>.&#8221;
Read: <a href="https://www.benzinga.com/economics/23/12/36069647/2024-outlook-put-pause-pivot">2024 Outlook: Put, Pause, Pivot</a>
John Bilton, head of Global Multi-Asset Strategy at JPMorgan, and his team <a href="https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/insights/portfolio-insights/pi-gaav.pdf">shared</a> insights from the Multi-Asset Solutions Strategy Summit they had recently.
&#8220;We see positive U.S. stock performance broadening beyond tech as an improving U.S. inventory cycle boosts cyclical sectors,&#8221; said Bilton. &#8220;Japanese stocks remain attractive, given rerating potential driven by corporate governance reforms.&#8221;
Here&#8217;s a quick look at their perspective on each asset class and few trading ideas around them (added by author):
<h2 class="wp-block-heading">Equity</h2>
JPMorgan is overweight on U.S., U.K. and Japanese equity, and underweight on European equity and Emerging Markets (ex-China).
<ul>
<li>U.S.: Expectations for an earnings growth estimate of 7% into the next year. Lower rates to provide support to stock multiples. Cash generation potential in U.S. equity. Equities outlook is also improving as the earnings downgrade cycle appears to be bottoming. The SPDR S&amp;P 500 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>), the iShares Core S&amp;P 500 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IVV#NYSE">IVV</a>) and the Vanguard 500 Index Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VOO#NYSE">VOO</a>) are popular funds to gain exposure to broad-market U.S. equity.</li>
<li>U.K.: U.K. equity is cheap and supported by valuations and flows. It is a defensive market; with a positive gearing towards commodities. The iShares MSCI United Kingdom ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EWU#NYSE">EWU</a>) is a popular U.K. equity tracking ETF.</li>
<li>Japan: Japanese stocks remain attractive. There&#8217;s rerating potential, given improving nominal growth in the country and scope for valuation expansion. The corporate governance reforms mandated by the Tokyo Stock Exchange should support shareholder returns and drive up ROE. The iShares MSCI Japan ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EWJ#NYSE">EWJ</a>) offers exposure to Japanese equity.</li>
<li>Europe: European growth is expected to remain sluggish going into 2024. </li>
<li>EM: Emerging market equities, though cheap, lack clear catalysts for a rebound. </li>
</ul>
<h2 class="wp-block-heading">Fixed-Income</h2>
From the fixed-income space, JPMorgan is overweight U.S. Treasury and high-yield corporate. It is underweight EMD hard currency.
<ul>
<li>The prospect of rate cuts in 2024 supports a duration overweight position. Yields may begin to fall steadily as rate cuts begin.</li>
<li>Investors should prefer U.S. Treasuries to other G4 countries. Yields in the low 4s should be attractive ahead of Fed rate cuts. JPMorgan sees potential returns of 10%–20% if growth disappoints. The iShares 20+ Year Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NYSE">TLT</a>), the iShares 7-10 Year Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NYSE">IEF</a>) and the SPDR Bloomberg 1-3 Month T-Bill ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BIL#NYSE">BIL</a>) are popular ways to get exposure to U.S. Treasury.</li>
<li>Overweight corporate high-yield debt as there&#8217;s modest scope for spread tightening. Fundamentals appear supportive with limited rise in defaults. Overall, the carry looks attractive. The iShares iBoxx $ High Yield Corporate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/HYG#NYSE">HYG</a>) and the iShares Broad USD High Yield Corporate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/USHY#NYSE">USHY</a>) are two of the largest ETFs providing exposure to high-yield corporate debt in the U.S.</li>
</ul>
<h2 class="wp-block-heading">Currency &amp; Cash</h2>
The US dollar, as tracked by the Invesco DB US Dollar Index Bullish Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>), appears set to weaken in 2024. JPMorgan sees a soft landing for the greenback as growth broadens out globally.
Rate cuts possibility in the U.S. further supports a US dollar underweight position.
Bilton is also underweight on cash. &#8220;Cash returns set to fall as cutting cycle begins; long-term USD rates likely nearer 2.5% than 5.5%,&#8221; he laid out.
Now Read: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/11/35837453/goldman-sachs-2024-equity-outlook-winning-stocks-and-sectors-to-watch">Goldman Sachs&#8217; 2024 Equity Outlook: Winning Stocks And Sectors To Watch</a>

USHY

S&P 500 Likely To 'Test The 5,000 Level': JP Morgan On Where To Allocate In 2024

BlackRock Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BLK#NYSE">BLK</a>) doesn&#8217;t anticipate rate cuts until the second half of 2024. The shape of the yield curve and the trajectory of growth will be key drivers of returns.
Gargi Pal Chaudhuri, head of iShares Investment Strategy Americas at BlackRock, <a href="https://www.ishares.com/us/insights/year-ahead-outlook-2024#macro">shared</a> her view on the outlook. 
&#8220;The shape of the yield curve is now signaling that it's time to consider allocating out of cash,&#8221; noted Chaudhuri. She believed that sitting in cash in 2024 would mean missing out on bond and equity market returns.
Chaudhuri identified opportunities to deploy cash selectively across asset classes:
<ul>
<li>Fixed income: pairing intermediate duration core holdings with differentiated income-seeking exposures.</li>
<li>Equities: adding downside protection in core exposures while taking targeted risk in loveable laggards.</li>
</ul>
An interesting fact that came to light from the report was that in the previous five hiking cycles since 1990, the Fed paused an average of 10 months between its last hike and its first cut.&nbsp;On average, stock and bond returns have been higher during the pause period than in easing periods immediately following the first cut.
Frequent portfolio adjustments may be needed in 2024, owing to:
<ul>
<li>Geopolitical risks</li>
<li>Election cycles</li>
<li>Worsening U.S. fiscal backdrop, and</li>
<li>Shifting central bank narratives</li>
</ul>
For equity allocations, managing macro risks in a slowing growth backdrop will be key.&nbsp;
&#8220;In a shifting macro environment, remaining invested can be paramount, but adding downside resiliency to core equity holdings could make sense for many investors,&#8221; said Chaudhuri. 
Using ETFs as investment vehicles could be a good strategy in such a macro-environment, per BlackRock, as these efficiently adjust to rapidly changing realities.
For reference, SPDR S&amp;P 500 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>), iShares Core S&amp;P 500 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IVV#NYSE">IVV</a>), Vanguard Total Stock Market ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VTI#NYSE">VTI</a>) and Invesco QQQ Trust, Series 1 (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>) are the most popular and biggest U.S. equity tracking ETFs in the U.S.
The most popular intermediate-term bond ETFs are Vanguard Intermediate-Term Corporate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VCIT#NYSE">VCIT</a>), iShares 7-10 Year Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NYSE">IEF</a>) and Vanguard Intermediate-Term Treasury ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VGIT#NYSE">VGIT</a>).
Photo: Shutterstock

Personal Finance

VCIT

VGIT

Traders May Need Frequent Portfolio Adjustments In 2024: BlackRock

October jobs report numbers missed expectations Friday, and came in at nearly half of September's <a href="https://www.benzinga.com/economics/macro-economic-events/23/11/35589503/labor-market-shows-signs-of-softening-october-payrolls-decline-to-150-000-below-e">reported figures</a>. 
Non-farm payrolls increased by 150,000 jobs in October, registering a steep decline from September's 297,000 jobs. The figure fell short of market forecasts, which stood at 180,000. One key reason for the deceleration is likely the <a href="https://www.benzinga.com/topic/uaw">United Auto Workers strikes</a>, which resulted in a net loss of jobs for the manufacturing sector.
<h2 class="wp-block-heading">Market Reaction To The US Jobs Report</h2>
Treasury yields tumbled across the board. The yield on the two-year Treasury fell to 4.87%, a decrease of more than 10 basis points, while the 10-year Treasury yields fell by 11 basis points to 4.56%. The benchmark Treasury yield has declined this week from recent highs, when it occasionally traded above the 5% threshold.
The dip in yields led to gains in exchange-traded funds invested in T-bonds. At the time of writing, these ETFs were recording the following price action Friday: 
<ul>
<li>iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) was up 1.59%.</li>
<li>Vanguard Long-Term Treasury ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/VGLT#NASDAQ">VGLT</a>) gained 1.58%.</li>
<li>iShares 7-10 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NASDAQ">IEF</a>) gained 1.03%.</li>
<li>SPDR Bloomberg 1-3 Month T-Bill ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BIL#NYSE">BIL</a>) was up 0.02%.</li>
<li>iShares 1-3 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SHY#NASDAQ">SHY</a>) was up 0.19%.</li>
</ul>
Also Read: <a href="https://www.benzinga.com/economics/macro-economic-events/23/11/35570015/october-jobs-report-expected-to-show-dip-heres-how-markets-may-react">October Jobs Report Expected To Show Dip — Here&#8217;s How Markets May React</a>
<h2 class="wp-block-heading">5 Economists React To NFPs Report</h2>
Joseph Brusuelas, chief economist at RSM US LLP, said the moderation in the pace of hiring points towards a cooler pace of growth and inflation. This could actually be needed by the American economy, which has been hiring and expanding at a torrid pace in recent months, he said. 
Lawrence Yun, chief economist at NAR, sees the Federal Reserve pivoting from raising interest rates to the neutral stance it has now to eventually cutting interest rates next year. &#8220;Be ready for more home buyers and more home sellers,&#8221; he said. 
Oliver Rust, head of product at Truflation, said the unemployment figures suggest the effect of monetary policy tightening is not feeding through to the labor market in a meaningful way. As such, he warns that an interest rate hike in December may be back on the table.
Brad McMillan, CIO for Commonwealth Financial Network, said the job report will help keep the Fed on the sidelines going forward. Since the dip in job numbers was anticipated, McMillan said the actual numbers — adjusted for the UAW strike — are probably better than the report ,indicating that despite the slowdown, job growth remains healthy overall.
Chris Zaccarelli, CIO for Independent Advisor Alliance, said the jobs report is one to trigger a &#8220;risk-on rally&#8221; into year-end. &#8220;Given that jobs growth is slowing and the unemployment rate is ticking up slightly, that is the kind of data that will keep the Fed on hold and both stock and bond prices should move higher (bond yields lower) in the absence of a more aggressive Fed, &#8221; he said. 
&#8220;The market climbs a wall of worry and we may see many more gains — in the form of a short squeeze and FOMO — before the next bear market begins,&#8221; he said. 
Read Next: <a href="https://www.benzinga.com/economics/macro-economic-events/23/10/35272828/economists-see-recession-risk-waning-end-of-fed-rate-hikes-how-could-treasury-etf">Economists See Recession Risk Waning, End Of Fed Rate Hikes: How Could Treasury ETFs React To Yields?</a>
Photo via Shutterstock.

Much-Needed Cooling Off Or Risk-On Rally Ahead? Yields Tumble, Bonds Gain After October Jobs Report

The U.S. Treasury released its quarterly refunding statement Wednesday, letting anxious bond holders catch some breath. 
The &#8220;Treasury currently expects privately-held net marketable borrowing of $776bln in Q1 FY 2024&#8230; lower than what was cited at the August refunding, primarily due to projections of higher receipts which were somewhat offset by higher outlays,&#8221; the report said. 
While the <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/10/35519171/fed-meeting-preview-bank-of-america-expects-one-more-interest-rate-hike-and-heres-w">Fed&#8217;s FOMC meeting</a> Wednesday is in the spotlight for most market watchers, fixed income investors are watching the U.S. Treasury. The Treasury&#8217;s borrowing plans help bond market investors such as those invested in the iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>), the iShares 7-10 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NASDAQ">IEF</a>) and the SPDR Bloomberg 1-3 Month T-Bill ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BIL#NYSE">BIL</a>) better position themselves and their portfolios.
The U.S. Department of the Treasury is offering $112 billion in Treasury securities to refund approximately $102.2 billion of privately held Treasury notes maturing on Nov. 15, 2023.&nbsp;This issuance will raise new cash from private investors of approximately $9.8 billion.&nbsp;The securities are:
<blockquote class="wp-block-quote"><ul>
<li>A three-year note in the amount of $48 billion, maturing Nov. 15, 2026;</li>
<li>A 10-year note in the amount of $40 billion, maturing Nov. 15, 2033; and</li>
<li>A 30-year bond in the amount of $24 billion, maturing Nov. 15, 2053.</li>
</ul>
<cite>Source: Nov 1 Quarterly Refunding Statement &#8211; US Treasury</cite></blockquote>
Also Read: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/10/35378461/10-year-yield-at-5-triggers-waves-of-treasury-buyers-bill-ackman-technical-indicato">10-Year Yield At 5% Triggers Waves Of Treasury Buyers: Bill Ackman, Technical Indicators Hint At Potential Shift</a>
The Treasury said it recognizes that 10-year yields have experienced significant fluctuations, trading within a 100-basis-point range since the last meeting in August. Two-year Treasury yields have been comparatively more stable but still traded in a 45-basis-point range. 
Strong economic and labor market data, the possibility of a higher neutral interest rate, supply-demand dynamics and a positive &#8220;term premium&#8221; in long-dated Treasury securities were cited as factors contributing to the significant fluctuations seen in bonds along the far end of the yield curve.
The <a href="https://home.treasury.gov/news/press-releases/jy1864">report</a>, in essence, underscored the need for Treasury to maintain flexibility in its issuance strategy, citing examples to lay down the fiscal and economic backdrop. It reemphasized the importance of addressing factors like the global macroeconomic outlook, term premium and global monetary policy synchronization when evaluating demand for U.S. Treasuries. 
The Treasury Committee recommended considering increased issuance in more liquid parts of the yield curve and retaining flexibility with T-Bill share in the medium term. The report suggests no increase in 20-year issuance and a more modest increase in seven-year issuance relative to other tenors.
Read Next: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/10/35097916/yield-curve-inversion-may-not-predict-recession-but-analyst-says-too-early-to-decla">Yield Curve Inversion May Not Predict Recession, But Analyst Says Too Early To Declare &#8216;All Clear&#8217; On Downturn</a>
Photo via Shutterstock.

Treasury's Refunding Statement Hints At Increased Issuance In More Liquid Parts Of Yield Curve

On CNBC&rsquo;s &quot;<a href="https://www.cnbc.com/video/2023/10/24/final-trades-wynn-mcdonalds-more.html">Halftime Report Final Trades</a>,&quot; Josh&nbsp;Brown of Ritholtz Wealth Management named iShares 7-10 Year Treasury Bond ETF (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/ief#NASDAQ">IEF</a>) <a href="https://www.benzinga.com/news/earnings/23/10/35409127/why-the-fear-level-among-us-investors-is-easing"> as his final trade. </a>
Jim Lebenthal of Cerity Partners picked Wynn Resorts, Limited (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/wynn#NASDAQ">WYNN</a>). Las Vegas Sands (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/lvs#NYSE">LVS</a>), last week, reported better-than-expected third-quarter financial results. &quot;I think you got a good report coming up in a couple of weeks [from Wynn Resorts],&quot; he noted.
HSBC recently initiated coverage on the stock with a Buy rating and a $111 price target.
Don&rsquo;t forget to check out our <a href="https://www.benzinga.com/premarket/"> premarket coverage here </a> 
Stephanie Link of Hightower said she likes McDonald&#39;s Corporation (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/mcd#NYSE">MCD</a>), which is down 14% from its highs.
Barclays analyst Jeffrey Bernstein recently maintained McDonald&#39;s with an Overweight and lowered the price target from $345 to $315. McDonald&#39;s also increased its quarterly cash dividend by 10%.
Price Action: Wynn Resorts shares gained 1.8% to close at $91.42, while McDonald&#39;s shares rose 1% to settle at $257.27 on Tuesday.
Check This Out: <a href="https://www.benzinga.com/news/earnings/23/10/35409030/boeing-microsoft-and-3-stocks-to-watch-heading-into-wednesday"> Boeing, Microsoft And 3 Stocks To Watch Heading Into Wednesday</a>
Photo: Shutterstock

Long Ideas

Media

WYNN

McDonald's, Wynn Resorts And More: CNBC's 'Final Trades'

CNBC Halftime Report Final Trades: Wynn Resorts, McDonald's, IShares 7-10 Year Treasury Bond ETF

To gain an edge, this is what you need to know today.
<img alt="" src="https://thearorareport.com/wp-content/uploads/2023/10/2023-10-24_08h14_11.png" style="height:413px; width:624px" />
<h3>Buying In Stocks</h3>
Please&nbsp;<a href="https://thearorareport.com/stock-market-chart-analysis-10-year-yield-stock-buying-ief-mc-10242023">click here</a>&nbsp;for a chart of iShares 7-10 Year Treasury Bond ETF (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/ief#NASDAQ">IEF</a>).
Note the following:
<ul>
<li>The trendline on the chart shows that&nbsp;IEF&nbsp;has been in a downtrend.&nbsp;IEF&nbsp;being in a downtrend means that the yield on 10 year Treasuries has been rising.&nbsp;This has been putting pressure on the stock market. The chart shows that IEF bounced yesterday and is bouncing more today as yields pull back from the psychologically important 5% level.</li>
<li>The pullback in yields is bringing in buyers.</li>
<li>Two very important earnings for the stock market are Microsoft Corp (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/msft#NASDAQ">MSFT</a>) and Alphabet Inc Class C (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/goog#NASDAQ">GOOG</a>).&nbsp;Both report earnings after the market close.</li>
<li>As is their pattern, the momo crowd is buying tech stocks ahead of the earnings on hope strategy.</li>
<li>Prudent investors need to remember that hope is never a good strategy.</li>
<li>For your buying, consider sticking to the proven system with an unrivaled track record that combines the six screens of the&nbsp;<a href="https://thearorareport.com/zyxmethod">ZYX Change Method</a>&nbsp;and the adaptive&nbsp;<a href="https://thearorareport.com/ALLOCATION%2BMODELS.htm">ZYX Asset Allocation Model</a>&nbsp;with inputs in ten categories.</li>
<li>There is also buying coming into the stock market on delays in Israeli invasion of Gaza.</li>
<li>Bitcoin and speculative stocks tend to be correlated.&nbsp; Buying is coming into speculative stocks in sympathy with the surge in bitcoin.&nbsp;Please scroll down to see the bitcoin section.</li>
<li>Earnings are in focus as 30% of S&amp;P 500 earnings are being reported this week.&nbsp; Among the important companies reporting earnings, earnings from&nbsp;Coca-Cola Co&nbsp;(NYSE: <a class="ticker" href="https://www.benzinga.com/stock/ko#NYSE">KO</a>),&nbsp;Verizon Communications Inc.&nbsp;(NYSE: <a class="ticker" href="https://www.benzinga.com/stock/vz#NYSE">VZ</a>), Rtx Corp&nbsp;(NYSE: <a class="ticker" href="https://www.benzinga.com/stock/rtx#NYSE">RTX</a>), Dow Inc&nbsp;(NYSE: <a class="ticker" href="https://www.benzinga.com/stock/dow#NYSE">DOW</a>),&nbsp;3M Co&nbsp;(NYSE: <a class="ticker" href="https://www.benzinga.com/stock/mmm#NYSE">MMM</a>),&nbsp;Sherwin-Williams Co&nbsp;(NYSE: <a class="ticker" href="https://www.benzinga.com/stock/shw#NYSE">SHW</a>),&nbsp;General Motors Co&nbsp;(NYSE: <a class="ticker" href="https://www.benzinga.com/stock/gm#NYSE">GM</a>), and&nbsp;General Electric Co&nbsp;(NYSE: <a class="ticker" href="https://www.benzinga.com/stock/ge#NYSE">GE</a>)&nbsp;are better than expected; earnings from HCA Healthcare Inc&nbsp;(NYSE: <a class="ticker" href="https://www.benzinga.com/stock/hca#NYSE">HCA</a>),&nbsp;AGNC Investment Corp&nbsp;(NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/agnc#NASDAQ">AGNC</a>),&nbsp;Corning Incorporated&nbsp;(NYSE: <a class="ticker" href="https://www.benzinga.com/stock/glw#NYSE">GLW</a>), Packaging Corp Of America&nbsp;(NYSE: <a class="ticker" href="https://www.benzinga.com/stock/pkg#NYSE">PKG</a>), and&nbsp;Polaris Inc&nbsp;(NYSE: <a class="ticker" href="https://www.benzinga.com/stock/pii#NYSE">PII</a>)&nbsp;are worse than expected.</li>
<li>As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.&nbsp;Please scroll down to see the protection band.</li>
</ul>
<h3>Japan</h3>
We have been sharing with you that the monetary policy in Japan is having a major impact on the&nbsp;U.S. stock market and the impact will likely increase as Bank of Japan (BOJ) tightens its monetary policy.
BOJ&nbsp;conducted a buying operation to purchase JGBs with maturities between 5 - 10 years and 10 - 25 years.
Japan is considering an income tax cut for individuals
<h3>Europe</h3>
European Central Bank (ECB) is likely to pause interest rate hikes and move to shrinking its balance sheet.
<h3>Magnificent Seven Money Flows</h3>
In the early trade, money flows are positive in Microsoft, Alphabet, Meta Platforms Inc (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/meta#NASDAQ">META</a>), Amazon.com, Inc. (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/amzn#NASDAQ">AMZN</a>), NVIDIA Corp (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/nvda#NASDAQ">NVDA</a>), and Tesla Inc (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/tsla#NASDAQ">TSLA</a>).
In the early trade, money flows are neutral in Apple Inc (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/aapl#NASDAQ">AAPL</a>).
In the early trade, money flows are mixed in SPDR S&amp;P 500 ETF Trust (ARCA:SPY) and Invesco QQQ Trust Series 1 (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/qqq#NASDAQ">QQQ</a>).
<h3>Momo Crowd And Smart Money In Stocks</h3>
The momo crowd is buying stocks in the early trade.&nbsp;Smart money is &#128274;&nbsp;in the early trade.&nbsp;To see the locked content, <a href="https://thearorareport.com/sub">please click here to start a free trial</a>.
<h3>Gold</h3>
The momo crowd is buying gold in the early trade.&nbsp;Smart money is &#128274;&nbsp;in the early trade.
For longer-term, please see gold and silver ratings.
The most popular ETF for gold is SPDR Gold Trust (ARCA:GLD). The most popular ETF for silver is iShares Silver Trust (ARCA:SLV).&nbsp;
<h3>Oil</h3>
The momo crowd is selling oil in the early trade.&nbsp;Smart money is &#128274;&nbsp;in the early trade.
For longer-term, please see oil ratings.
The most popular ETF for oil is United States Oil ETF (ARCA:USO).
<h3>Bitcoin</h3>
We have been sharing with you for some time that Bitcoin (CRYPTO: <a class="ticker" href="https://www.benzinga.com/quote/btc/usd">BTC</a>) market cap may add $1T&nbsp;if a spot bitcoin ETF is approved.&nbsp;We have also been sharing with you the buying pattern in bitcoin.&nbsp;Retail investors are aggressively buying bitcoin after whales ran it up over the weekend.&nbsp; Retail investors are now learning about a potential spot bitcoin ETF.
<h3>Markets</h3>
Our very, very short-term early stock market indicator is &#128274;.&nbsp;This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.
<h3>Protection Band And What To Do Now</h3>
It is important for investors to look ahead and not in the rearview mirror.
Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider holding &#128274; in cash or Treasury bills or allocated to short-term tactical trades; and short to medium-term hedges of &#128274;, and short term hedges of &#128274;. This is a good way to protect yourself and participate in the upside at the same time.
You can determine your protection bands by adding cash to hedges.&nbsp;The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive. If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.
It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.&nbsp;When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks.&nbsp; High beta stocks are the ones that move more than the market.
<h3>Traditional 60/40 Portfolio</h3>
Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.
Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of five year duration or less.&nbsp;Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.
The Arora Report is known for its accurate calls.&nbsp;The Arora Report correctly called the 2008 financial crash, the start of a mega bull market in 2009, the COVID crash, the post-COVID bull market, and the 2022 bear market.&nbsp; Please click here to sign up for a free forever <a href="https://thearorareport.com/generate-wealth-newsletter">Generate Wealth Newsletter</a>.

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Buying In Stocks On Pullback In Yields, Rush To Buy Bitcoin

The yields on 10-year Treasury bonds surged to 4.98% in early morning trading on Thursday, reaching their highest level <a href="https://www.benzinga.com/topic/treasury-bonds">since mid-July 2007</a>.
As yields approached the significant 5% milestone, Wall Street reacted. In a note shared on Thursday, Vishal Khanduja, managing director and portfolio manager at Morgan Stanley Investment Management, expressed the view that a 5% yield on 10-year US Treasuries presents an attractive buying opportunity for investors. According to Khanduja, it&#8217;s an excellent chance to extend the duration of a portfolio. 
Goldman Sachs analysts, including Arun Prakash, CFA, and John Marshall, believe that 10-year Treasuries have underperformed their usual relationship with macro assets and expect them to revert to the mean in the coming months. They anticipate that yields on 10-year Treasuries could decrease to around 4.2%-4.3%, indicating that call options on the iShares 7-10 Year Treasury ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NYSE">IEF</a>) may present an appealing opportunity for investors to protect against the risk of lower yields.
Chart: Treasury Yields Rose To The Highest Level In More Than 17 Years
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="509" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/10/19104104/US10Y_2023-10-19_15-39-49_92c66-1024x509.png" alt="" class="wp-image-127189" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/10/19104104/US10Y_2023-10-19_15-39-49_92c66-1024x509.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/10/19104104/US10Y_2023-10-19_15-39-49_92c66-300x149.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/10/19104104/US10Y_2023-10-19_15-39-49_92c66-768x382.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/10/19104104/US10Y_2023-10-19_15-39-49_92c66-1536x764.png 1536w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/10/19104104/US10Y_2023-10-19_15-39-49_92c66.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
<h2 class="wp-block-heading">Bond ETFs Tracking 10-Year Treasury</h2>
The 10-year Treasury bond is closely monitored by several exchange-traded funds (ETFs), including:
<ul>
<li>US Treasury 10 Year Note ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UTEN#NYSE">UTEN</a>)</li>
<li>iShares 7-10 Year Treasury Bond ETF </li>
<li>BondBloxx Bloomberg Ten Year Target Duration US Treasury ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XTEN#NYSE">XTEN</a>)</li>
</ul>
There are also leveraged ETFs aiming to amplify the returns of the underlying 10-year Treasury bonds, including: 
<ul>
<li>Direxion Daily 10-YR Treasury Bull 3X Shrs (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TYD#NYSE">TYD</a>)</li>
<li>Direxion Daily 10-YR Treasury Bear 3X Shrs (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TYO#NYSE">TYO</a>)</li>
</ul>
<h2 class="wp-block-heading">Gold Vs. Treasuries</h2>
Otavio Costa, partner and portfolio manager at Crescat Capital, offered a different perspective by comparing the price of gold to that of Treasuries. 
Hard assets, such as precious metals, have historically delivered strong performances, even in the face of rising interest rates, he says. This challenges the notion that higher Treasury yields reduce the appeal of holding an asset that doesn&#8217;t generate any yield.
<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"> 
<div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="500" data-dnt="true">One must take note of today&#39;s strength in precious metals as Treasuries sell off significantly. A popular argument against the idea of investing in hard assets in a rising interest rate environment is the notion that it might not be appealing to hold an asset that doesn&#39;t… <a href="https://t.co/lQwq5twvij">pic.twitter.com/lQwq5twvij</a>
&mdash; Otavio (Tavi) Costa (@TaviCosta) <a href="https://twitter.com/TaviCosta/status/1714302169216901502?ref_src=twsrc%5Etfw">October 17, 2023</a></blockquote>
<script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script></div>
</figure>
Read Also: <a href="https://www.benzinga.com/markets/bonds/23/10/35311645/30-year-yields-rise-above-5-as-biden-announces-unprecedented-congress-support-for-israel">30-Year Yields Rise Above 5% As Biden Announces &#8216;Unprecedented&#8217; Congress Support For Israel</a>
In early August, billionaire hedge fund investor Bill Ackman made headlines when he announced a substantial short position in 30-year Treasuries. He did this initially as a hedge against the impact of higher long-term rates on stocks and also because he believed it was a high-probability standalone bet. Since making that statement, the long bond has declined by 12%, making Ackman&#8217;s bet a profitable one as of now.
<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"> 
<div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="500" data-dnt="true">I have been surprised how low US long-term rates have remained in light of structural changes that are likely to lead to higher levels of long-term inflation including de-globalization, higher defense costs, the energy transition, growing entitlements, and the greater bargaining…
&mdash; Bill Ackman (@BillAckman) <a href="https://twitter.com/BillAckman/status/1686906272937869312?ref_src=twsrc%5Etfw">August 3, 2023</a></blockquote>
<script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script></div>
</figure>
Earlier this week, the popular economist Mohamed El-Erian highlighted the progressive erosion of the U.S. Treasury market as the world&#8217;s <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/10/35294565/2-year-treasury-yields-hit-17-year-highs-analyst-says-us-bond-market-is-losing-its-">preferred risk-free asset. </a>
Read Now: <a href="https://www.benzinga.com/etfs/sector-etfs/23/10/35316269/30-year-mortgage-rates-skyrocket-to-8-highest-in-over-2-decades-amid-treasury-turmoil">30-Year Mortgage Rates Skyrocket To 8%, Highest In Over 2 Decades Amid Treasury Turmoil</a>

Direxion Daily 7-10 Year Treasury Bull 3X Shares

Direxion Daily 7-10 Year Treasury Bear 3X Shares

UTEN

BondBloxx ETF Trust BondBloxx Bloomberg Ten Year Target Duration US Treasury ETF

XTEN

5 ETFs To Watch As 10-Year Treasury Approaches 5% Yield, Analysts Say It's Now A 'Buy'

The Federal Reserve&#8217;s commitment to maintaining higher interest rates for longer has unleashed seismic tremors within the bond market, culminating in an explosive surge in yields across all maturity periods. Initially, the reverberations were absorbed by 2-year yields, a segment that had historically been swift to react to policy <a href="https://www.benzinga.com/federal-reserve">cues from Powell and the Fed. </a>
But as investors adjust their interest rate projections, the intense surge in Treasury yields is now extending its reach to longer-term maturities.
At the latest FOMC meeting, the Fed left the rate unchanged in the 5.25%-5.50% range, but macroeconomic projections indicated a median preference for another rate hike in 2023, and trimmed the rate-cut scenario to only 50 basis point in 2024, down from a full percentage <a href="https://www.benzinga.com/economics/macro-economic-events/23/09/34772413/jerome-powell-signals-caution-economic-data-to-determine-if-more-interest-rate-hi">point in June&#8217;s projections. </a>
<h2 class="wp-block-heading">Chart: 10-Year And 30-Year Treasury Yields Soar To Over A Decade High</h2>
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="541" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/25115920/US10Y_2023-09-25_17-58-56_7bbca-1024x541.png" alt="" class="wp-image-112211" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/25115920/US10Y_2023-09-25_17-58-56_7bbca-1024x541.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/25115920/US10Y_2023-09-25_17-58-56_7bbca-300x159.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/25115920/US10Y_2023-09-25_17-58-56_7bbca-768x406.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/25115920/US10Y_2023-09-25_17-58-56_7bbca-1536x812.png 1536w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/25115920/US10Y_2023-09-25_17-58-56_7bbca.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
Monday witnessed an astonishing milestone as the yield on the benchmark 10-year Treasury bond rocketed to over 4.50%, a threshold not seen since October 2007.
Simultaneously, the yields on 30-year Treasury securities scaled to 4.62%, marking their highest level since February 2011.
These dramatic increases are primarily driven by rising real rates, directly influenced by the Fed&#8217;s policy stance.
The ramifications of this towering escalation in long-term Treasury yields are far-reaching as they directly influence a slew of real economy products, including auto loans, credit cards and mortgage rates. 
As these yields ascend, the cost of borrowing for both consumers and businesses ascends in tandem, potentially triggering a deceleration in economic growth.
<h2 class="wp-block-heading">Carnage Unleashed: Long-Term Treasury ETFs in Turmoil</h2>
Exchange-traded funds (ETFs) linked to long-term Treasuries are bearing the brunt of these yield surges. 
The iShares 20+ Year Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NYSE">TLT</a>), the largest Treasury-related ETF with $38 billion in assets under management, experienced a 1.9% decline on Monday, reaching its lowest level in over a decade. This marks the ETF&#8217;s fifth consecutive week of losses, the worst losing streak in a year. 
Similar declines have been observed in other longer-dated Treasury ETFs, including the SPDR Portfolio Long-Term Treasury ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPTL#NYSE">SPTL</a>) and the Vanguard Long-Term Treasury ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VGLT#NYSE">VGLT</a>), with the latter hitting its lowest level since inception.
The iShares 7-10 Year Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NYSE">IEF</a>) fell by 0.5% Monday, reaching levels last seen in April 2011. Since its peak in 2020, the ETF has experienced a 25% decline. 
The iShares 10-20 Year Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TLH#NYSE">TLH</a>) was also strongly hit, down 1.6% on Monday and by a whopping 44% since March 2020. 
Read Now: <a href="https://www.benzinga.com/economics/macro-economic-events/23/09/34772413/jerome-powell-signals-caution-economic-data-to-determine-if-more-interest-rate-hi">Morgan Stanley Strategist Advocates Defensive Stance As Market Dynamics Shift</a>
Photo: Shutterstock

US 10-Year, 30-Year Yields Hit Decade Highs, Shaking 5 Treasury ETFs

Lawrence Summers, who previously served as the U.S. treasury secretary in the Clinton administration, has recently voiced concerns regarding the potential rise in 10-year yields, anticipating them to be significantly higher than what we&#8217;ve seen in <a href="https://www.benzinga.com/money/how-to-buy-treasury-bonds">the last 20 years</a>.
The expected increase in government budget deficits will likely draw more attention from investors, Summers said in an appearance <a href="https://www.bloomberg.com/news/articles/2023-08-16/summers-says-10-year-yields-could-average-4-75-in-coming-decade?srnd=premium&amp;sref=TBDibEcD">on</a> Bloomberg Television&#8217;s &#8220;Wall Street Week&#8221; with David Westin. 
Summers stood among the earlier forecasters of an economic &#8220;overheating&#8221; preceding the surge in inflation during 2021. 
Read also: <a href="https://www.benzinga.com/money/best-online-brokers-for-bonds">Best Online Brokers for Bonds</a>
The former treasury secretary, now a professor at Harvard University, offered an interesting breakdown of the 10-year yields into three components:
<ul>
<li>Inflation, which he predicts will rise faster than before, possibly at 2.5%.</li>
<li>A real return of 1.5% to 2%, influenced by the government&#8217;s growing borrowing needs. This includes factors like increased defense expenditures, potential extension of some tax cuts from the Trump era and rising interest costs on existing debt.</li>
<li>A term premium, which compensates investors for choosing long-term securities over short-term ones. Summers estimates this to be between 0.75 to 1 percentage point.</li>
</ul>
Combining these factors, Summers suggests that investors might be eyeing a 4.75% yield or higher on the 10-year in the upcoming decade. 
On the immediate economic future, Summers predicts a robust economy for a short period, but he doesn&#8217;t rule out the possibility of a recession in 2024.
After the release of <a href="https://www.benzinga.com/top-stories/23/08/33880614/fomc-minutes-reveal-boards-divide-majority-supports-further-rate-increases">July&#8217;s FOMC minutes</a> on Wednesday, 10-year U.S. Treasury yields rose by 4 basis points to 4.26%, hitting the highest since September 2007. Historically, over the last two decades, these yields have averaged around 2.9%.
The iShares 7-10 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NASDAQ">IEF</a>) declined 0.3%, on track for the lowest close since November 8, 2022. 
This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo: Shutterstock.

Larry Summers Predicts 10-Year Yields Will Hit 4.75% Or Higher In Next Decade As Economy Shifts To 'New Era'

To gain an edge, this is what you need to know today.
<img alt="" src="https://thearorareport.com/wp-content/uploads/2023/08/2023-08-11_08h33_10.png" style="height:375px; width:624px" />
<h3>Hotter PPI</h3>
Please&nbsp;<a href="https://thearorareport.com/stock-market-chart-analysis-biden-china-time-bomb-ashr-mc-08112023">click here</a>&nbsp;for a chart of China ETF Xtrackers Hvst CSI 300 China A-Shs ETF (ARCA: ASHR).
Note the following:
<ul>
<li>The Arora Report has been warning you for a while that the worsening relationship between the&nbsp;U.S. and China is a risk that long term, prudent investors need to take into account.</li>
<li>Biden has soured the stock market sentiment by calling the Chinese economy a &ldquo;ticking time bomb.&rdquo;&nbsp;Biden also called the Communist Party&rsquo;s leaders &ldquo;bad folks.&rdquo;</li>
<li>Biden also jabbed China&rsquo;s President Xi by calling his signature Belt and Road Initiative the &ldquo;debt and noose.&rdquo;</li>
<li>The chart shows that unlike in the&nbsp;U.S., the&nbsp;AI&nbsp;rally in China did not sustain itself.&nbsp;Chinese companies are spending as heavily on&nbsp;AI&nbsp;as&nbsp;U.S. companies, but the&nbsp;AI&nbsp;frenzy has not taken hold among investors in China as it has among investors in the U.S.</li>
<li>The chart shows the downward sloping trendlines in the Chinese stock market. In contrast, there are upward sloping trendlines in the&nbsp;U.S. stock market.</li>
<li>Producer Price Index (PPI) came hotter than expected.&nbsp;Here are the details:
<ul>
<li>Headline PPI came at 0.3% vs. 0.2% consensus.</li>
<li>Core PPI came at 0.3% vs. 0.2% consensus.</li>
</ul>
</li>
<li>There were whisper numbers that core PPI would come below the consensus due to lower PPI in China.&nbsp;American producers are highly dependent on Chinese imports.</li>
<li>In The Arora Report analysis, the rise in PPI runs counter to momo gurus&rsquo; bullish narrative that inflation is over and done with and the Fed is going to cut interest rates.&nbsp;&nbsp;</li>
<li>Please&nbsp;<a href="https://thearorareport.com/stock-market-chart-analysis-inflation-rising-yields-ai-spy-ac-08102023">click here</a>&nbsp;for a chart of yesterday&rsquo;s stock market price action.&nbsp;The price action shown on the chart is negative from a technical perspective.&nbsp;There is concern that the stock market in the&nbsp;U.S. ran up yesterday morning after the release of CPI but smart money sold into the strength generated by momo buying, causing a reversal.&nbsp;The sell off was aided by the poor Treasury auction.&nbsp;Please read the <a href="https://thearorareport.com/">Afternoon Capsule</a> for details.</li>
<li>Investors may consider watching 7-10 year Treasury ETF&nbsp;iShares 7-10 Year Treasury Bond ETF (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/ief#NASDAQ">IEF</a>)&nbsp;and long bond Treasury ETF&nbsp;iShares 20 Plus Year Treasury Bond ETF (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/tlt#NASDAQ">TLT</a>).</li>
<li>As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents. Please scroll down to see the protection band.</li>
</ul>
<h3>Magnificent Seven Money Flows</h3>
In the early trade, money flows are negative in Amazon.com, Inc. (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/amzn#NASDAQ">AMZN</a>), NVIDIA Corp (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/nvda#NASDAQ">NVDA</a>), Microsoft Corp (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/msft#NASDAQ">MSFT</a>), Alphabet Inc Class C (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/goog#NASDAQ">GOOG</a>), Meta Platforms Inc (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/meta#NASDAQ">META</a>), Tesla Inc (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/tsla#NASDAQ">TSLA</a>), and Apple Inc (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/aapl#NASDAQ">AAPL</a>).
In the early trade, money flows are negative in SPDR S&amp;P 500 ETF Trust (ARCA:SPY)&nbsp;and mixed in Invesco QQQ Trust Series 1 (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/qqq#NASDAQ">QQQ</a>).
<h3>Momo Crowd And Smart Money In Stocks</h3>
The momo crowd is buying stocks in the early trade.&nbsp;Smart money is selling stocks in the early trade.
<h3>Gold</h3>
The momo crowd is buying gold in the early trade.&nbsp;Smart money is inactive in the early trade.
For longer-term, please see gold and silver ratings.
The most popular ETF for gold is SPDR Gold Trust (ARCA:GLD). The most popular ETF for silver is iShares Silver Trust (ARCA:SLV).&nbsp;
<h3>Oil</h3>
The momo crowd is buying oil in the early trade.&nbsp;Smart money is inactive in the early trade.
For longer-term, please see oil ratings.
The most popular ETF for oil is United States Oil ETF (ARCA:USO).
<h3>Bitcoin</h3>
Bitcoin (CRYPTO: <a class="ticker" href="https://www.benzinga.com/quote/btc/usd">BTC</a>) is range bound.
<h3>Markets</h3>
Our very, very short-term early stock market indicator is negative.&nbsp;This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.
<h3>Protection Band And What To Do Now</h3>
It is important for investors to look ahead and not in the rearview mirror.
Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider holding &#128274; in cash or Treasury bills or allocated to short-term tactical trades; and short to medium-term hedges of &#128274;, and short term hedges of &#128274;. This is a good way to protect yourself and participate in the upside at the same time.&nbsp;To see the locked content, <a href="https://thearorareport.com/sub">please click here to start a free trial</a>.
You can determine your protection bands by adding cash to hedges.&nbsp;The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive.&nbsp; If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.
It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.&nbsp;When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks.&nbsp; High beta stocks are the ones that move more than the market.
<h3>Traditional 60/40 Portfolio</h3>
Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.
Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of five year duration or less.&nbsp;Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.
The Arora Report is known for its accurate calls.&nbsp;The Arora Report correctly called the 2008 financial crash, the start of a mega bull market in 2009, the COVID crash, the post-COVID bull market, and the 2022 bear market.&nbsp; Please click here to sign up for a free forever <a href="https://thearorareport.com/generate-wealth-newsletter">Generate Wealth Newsletter</a>.

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