TRUST

 

Put your hand in the hand of the man from Galilee is a line in an old gospel tune.

Believer or non-believer, it's about trust. And according to a recent Financial Times blurb, one group you might not want to put your hand in the hands of when it comes to your investment future and interest rates is economists. 

Of  67 economists polled by Bloomberg in April, the Times  reported, every one of them predicted higher interest rates by this October. So far as everyone knows this has yet to happen. Consensus might be comforting, but it's also dangerous.

The explanations for the demise of interest rates in the U.S.10-year Treasury note are legion:

Wrong-footed bond fund managers covering their shorts or playing catch-up after missing the move. Foreign investors looking for a safe port to park their money and at the same time make some money. Pension funds who have to make a reasonable guess about their future obligations. A slower-than-expected-more lumbering U.S. economy coupled with the yield-hungry crowd. The Fed trying to hold the lid on future inflation concerns. All of these and more get tossed around daily in the MSM.

With the exception of  bond yields not much has changed since the start of the year other than equity valuations are less cheap though not so out of whack as to cause more than a sharp and, as many believe, much needed short-term correction. 

There is still plenty of money on the sidelines, most of it retail, as, according to one firm that tracks such things, recently reported, almost twice as much money during the first four months of this year flowed into savings accounts as into equity mutual funds.

Think of it this way. Savings accounts that yield next to nothing and a relentless rising equity market. This is an age old teeter-totter.  One end is fear of being in, the other missing out, setting the stage once again, a cynic might suggest, with an increasingly higher market to pull retail folks in at the later stages to push the market even higher and setting them up one more time for you know what.

So in any quick, sharp pullback, we'd be buyers because until interest rates spite there's still more upside left in this playful, aging puppy.  

That's our view. We hope you trust yours.