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Are 3% 10-Year Treasuries The Death Knell For Stocks, Bonds And Real Estate?

May 06, 2018 8:40 AM ETAM, CQP, EQM, HMLP, SPY6 Comments
Tyson Halsey, CFA profile picture
Tyson Halsey, CFA


  • 10-year US Treasury broke 3%, confirms bond bear market.
  • Commodities and inflation are the Achilles Heel for bonds.
  • MLPs are a good hedge.

The remarkable 34-year bull market in bonds which enriched stock, bond and real estate investors for the last three decades, broke another key milestone in April when the 10-year US Treasury yield rose above the 3%. Breaking this psychological milestone strengthens the argument that bonds have entered a bear market. And this may spell trouble for stocks, bonds and real estate.

  • Rising rates are a headwind to the stock market and a could tip this 10-year-old equity bull market into a bear market.
  • Rising rates and a bond bear market could mean that the world’s largest asset class has turned from a perennial safe moneymaker into a fundamentally challenged asset.
  • Since interest rates underpin real estate finance and declining rates have powered the real estate boom for the last three decades, rising interest rates could lead to challenges in real estate markets.

This letter will offer insight into this new interest rate regime, ways to protect your wealth and ways to prosper. Since October, we have been arguing that rising interest rates could unravel the stock, bond and real estate markets.

  • One problematic scenario would be if inflation were to reassert itself. In April, commodity prices began to rise and several companies’ earnings calls cited rising commodity prices as a stress on margins.

The Big Picture on Interest Rates:

https://lh5.googleusercontent.com/p1S_XfZWXbnz1YTlgioQL_cIH6c1DCJS6syMZLhG4SN2pdsr0e3Oac9PLj05tF77LQh09C94q9kMMOCGuxxz0GObGmJG5y742q7rfqNRGTLoKQeq7ENXeTge6JYlfGkEql5dkqmGmRNVyIcv5gSource: MFS1

Since August of 1981, interest rates as measured by the 10-year US Treasury yield have been declining. They first touched bottom in July, 2012 at 1.39% and again at 1.33% in July, 2016. Since then, they have been rising.

The $15 trillion in bond buying bond by global central banks since the Financial Crisis of 2008 have created artificially low interest rates. Starting in September 2013, the Federal Reserve began reversing its Quantitative Easing “QE” programs by reducing its monthly purchases of

This article was written by

Tyson Halsey, CFA profile picture
Tyson Halsey, CFA, founded Income Growth Advisors, LLC, a South Carolina based Registered Investment Advisor. Through his career, Halsey has researched and invested in technology, energy, quantitative strategies, been a shareholder activist on behalf of shareholder rights, and invested in Master Limited Partnerships (MLPs) since 2000. . Halsey has appeared in major media including The Wall Street Journal, Barron's, Charleston Post and Courier, South Carolina Public Radio and CNBC. Halsey won the USA Today CNBC Investment Challenge in 1992 in the options division.Halsey formed Optima Process Systems, Inc. in 2018 and used economic cost modelling for ESG solutions. We analyzed heavy oil upgrading in South America, bunker fuel desulfurization for IMO 2020, and biofuel and biomass processing. Halsey has moderated panels on the energy transition "ESG 2.0" for the Ivy Family Office Network (IVYFON).

Analyst’s Disclosure: I am/we are long AM EQM CQP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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