Since our last Market Update two weeks ago, the direction of the U.S. stock market and bond yields have been down and up, respectively. Global stocks were down -3.3% last week, led by U.S. markets. The 10-year U.S. Treasury bond is yielding 3.33% today, which is half a percentage point higher than one month ago.
The U.S. dollar is solidifying the ground it gained this summer on major international currencies. Today I bought some tickets to a sporting event in France. I paid less in U.S. dollars than the price that was quoted in Euros! The exchange rate was 1.00 Euro for $0.995. It was a phenomenon that I don’t remember experiencing, for the Euro is at a two-decade low compared to the U.S. dollar.
The recent trend in stocks, bond yields, and currency markets appear to have a common thread. Alicia Levine, market strategist at BNY Mellon Investment Management, suggested yesterday, “The lower risk sentiment was underpinned by an expectation of tighter monetary policy for longer. [It is] putting upward pressure on yields and the dollar.”