WEEKLY MARKET COMMENTARY

The Markets

Students of financial markets may have noted a historically unusual event last week.

On Thursday, the yield on 10-year U.S. Treasury notes briefly matched the dividend yield for the Standard & Poor’s (S&P) 500 Index. This type of convergence is uncommon. In normal times, the yield on 10-year Treasuries tends to be higher than the dividend yield of the S&P 500. Felix Salmon of Axios explained:

“The 10-year Treasury note is a risk-free asset: If you hold it for 10 years, you know exactly how much it’s going to return…The S&P 500 dividend yield is normally lower than the risk-free rate. Investors earn less in dividends than [they] would holding the same amount of money in Treasury bonds, but they hope that rising stock prices will make up the difference.”

These, however, are not normal times.

Throughout much of 2020, the S&P 500 Index offered investors a return comparable to, or higher than, 10-year Treasuries. Low Treasury yields reflected the Federal Reserve’s highly accommodative monetary policy, which kept the fed funds rate near zero to support the economy through the pandemic. Since August 2020, however, the yield on 10-year T-notes has been creeping higher despite the Fed’s actions. Last week, it closed at 1.46 percent.

Rising yields appeared to concern investors last week. Ben Levisohn of Barron’s reported:

“Usually, we can point to a big event or a piece of economic data that shook up the market, but that wasn’t the case this time. The data were solid, with weekly jobless claims dropping more than expected, durable-goods orders rising more than forecast, and personal income getting a big boost from stimulus checks sent out in January…But there was the 10-year Treasury yield.”

Rising Treasury yields suggest bond investors think the economy is likely to strengthen and pent-up consumer demand could spark spending on shopping, dining, and social events. A spending spree could lead to higher inflation, reported Elliot Smith of CNBC. Rising yields also could signal weak demand for U.S. Treasuries, according to Levisohn.

Last week, major U.S. stock indices finished lower.

AND THE MOST EXPENSIVE CITIES IN THE WORLD ARE…

Every year, The Economist Intelligence Unit (EIU) reports on the worldwide cost of living by surveying the cost of 138 goods and services in major cities around the world.

As of September 2020, prices were up just 0.3 percent, year-to-year. The cost of consumer staples remained fairly steady, overall. However, the prices for recreation (which includes personal electronics), personal care, tobacco, alcohol, and domestic help, increased. The report stated:

“Amid the pandemic, price-conscious consumers have also opted for cheaper products in many countries, increasing price competition for less-expensive goods…On the other hand, high-earning consumers have been comparatively unaffected by the pandemic. While they are likely to shop less, prices of premium products have remained resilient. Supply-chain problems have also had differing impacts on different goods, pushing up the price of high-demand products such as computers in some cities.”

Regionally, prices fell in Latin America, North America, Eastern Europe, and Africa. They increased in the Middle East, Asia, and Western Europe. The EIU’s World Cost of Living Index found, during 2020:

The most expensive cities in the world were:

• Paris, France
• Hong Kong, China
• Zurich, Switzerland
• Singapore, Malaysia
• Osaka, Japan
• Tel Aviv, Israel
• New York, United States
• Geneva, Switzerland
• Los Angeles, United States
• Copenhagen, Denmark

The least expensive cities in the world were:

• Damascus, Syria
• Tashkent, Uzbekistan
• Almaty, Kazakhstan
• Buenos Aires, Argentina
• Karachi, Pakistan
• Caracas, Venezuela
• Lusaka, Zambia
• Chennai, India
• Bangalore, India
• New Delhi, India

Weekly Focus – Think About It

“The wish to travel seems to me characteristically human: the desire to move, to satisfy your curiosity or ease your fears, to change the circumstances of your life, to be a stranger, to make a friend, to experience an exotic landscape, to risk the unknown.”

–Paul Theroux, Travel writer and novelist

At G&S Capital, we build dynamic portfolios and risk management strategies for each of our clients. Our client projects are led by knowledgeable, dedicated financial planners and supported by the G&S Capital team of specialists to provide personalized portfolios, unparalleled service, and independent advice

Sites & Sources

* These views are those of Carson Group Coaching, and not the presenting Representative or the Representative’s
Broker/Dealer, and should not be construed as investment advice.
* This newsletter was prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with the named
broker/dealer.
* There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified
portfolio. Diversification does not protect against market risk. Asset allocation does not ensure a profit or protect
against a loss.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal
and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund
shares is not guaranteed and will fluctuate.* Government bonds and Treasury Bills are guaranteed by the U.S.
government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and
fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject
to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield,
maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the
stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index
performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and
emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S.
Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term
bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set
twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity
futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14,
1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the
Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict
future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted
will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.
* Stock investing involves risk including loss of principal.
* Consult your financial professional before making any investment decision.

Sources:
https://finance.yahoo.com/quote/%5ETNX/history?p=%5ETNX
https://www.axios.com/treasury-yield-sp-convergence-efc3ee98-279a-4713-960d-7e52216deed1.html
https://www.wsj.com/articles/jerome-powell-sees-easy-money-policies-staying-in-place-11614092400?mod=searchresults_pos1&page=1&mod=article_inline
https://www.multpl.com/s-p-500-dividend-yield/table/by-month
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/TextView.aspx?data=yieldYear&year=2020
https://www.barrons.com/articles/the-stock-markets-rally-could-be-nearing-an-end-how-we-know-51614386520?refsec=the-trader
https://www.cnbc.com/2021/02/26/bank-of-englands-haldane-warns-on-inflation-bond-yields-move-higher.html
https://www.eiu.com/n/campaigns/worldwide-cost-of-living-2020
https://www.economist.com/graphic-detail/2020/11/18/where-are-the-worlds-most-expensive-cities
https://en.wikipedia.org/wiki/List_of_cheapest_cities
https://www.goodreads.com/author/quotes/9599.Paul_Theroux