Last week was a positive one for the U.S. stock market. The S&P 500 ended higher by more than 4% for the week. The DJIA finished up 749 points on Friday, making three consecutive weeks higher. Nevertheless, the market is still hovering around the lows seen in June. This little resurgence needs to prove itself before we get too excited.
Arguably, the more interesting story is that of bond yields. Key yields are at their highest level since 2008. The benchmark 10-year U.S. Treasury has grinded higher yet again since our last Market Update. It is 4.2%. The implications for lending and borrowing will be a significant influence on the economic picture in the months ahead.
Moreover, the Federal Reserve is likely to raise interest rates by another 0.75% at their next meeting on November 1-2. This interest rate hiking cycle has already made its way into the history books as the steepest since the 1980s. It is going to keep breaking its own record – to the chagrin of borrowers and the bewilderment of many bond investors.