Market Outlook: Yields Roaring

Investors have had much to celebrate, with continuing gains in the stock market and a number of good indicators in the overall economy. The current data prompted Morgan Stanley to give its latest Global Strategy Outlook the title “Macro Boring, Yields Roaring.” A closer look at the analysis of data shows why the investment house feels this way.The Economic Outlook
The International Monetary Fund’s report expects the global economy to stabilize throughout 2014 and 2015. Although they foresee global interest rates to rise from the current historic lows, they expect increases to be moderate. This condition will help consolidate revenue increases in a variety of industries, continuing stock market gains for some time. Market increases have been common not only in the United States, but also in other countries, helping to reinforce these positive economic forecasts.

Looking At the Market
Morgan Stanley’s outlook expects the economy to keep improving steadily, with significant gains in the stock market as revenues begin to increase. Their chart on the S & P 500 provides a look at risk appetite in the market. Here, investors can see the steady rise of stock prices. Although there have been a number of backslides as the economy found its footing, you can see the increasing ability to the market to withstand minor variances in economic conditions.

What About Bonds?
The Board of Governors of the Federal Reserve chart on bond yields show how precipitously yields have fallen over recent years. However, as the economy returns to stability the current low interest rate climate cannot be sustained. At some point in the near future, the Federal Reserve will be forced to raise interest rates to accommodate the strengthening economy. This increase will push yields upward. Exactly when this will occur is uncertain, and investors should be poised to make changes in their portfolio as the picture changes.

Low Volatility Expected
While these two conditions are present, another factor is keeping Morgan Stanley optimistic. This is the Chicago Board Options Exchange index of volatility. The chart indicates some of the lowest volatility since the early 2000s, down significantly from its troubling highs in 2009. This data bodes well for the stock market in general and for the general economic climate that has seen such disruption over recent years.

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One response to “Market Outlook: Yields Roaring

  1. Pingback: Bull Market: Asset manager €46.9bn profits overtake pre-crisis peak | Alpha Banker·

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