Dear Reader,
Today, I want to discuss the recent events that have impacted the stock market and bond yields. It's been quite a rollercoaster ride, but let's dive in and see what's been happening.
Over the weekend, Republicans and Democrats came together to avoid a government shutdown. This news brought relief to the markets, as a potential shutdown would have had a negative impact on U.S. shares. The S&P 500 had already experienced a significant drop in September, so this was a welcome development.
As a result of the avoidance of a shutdown, bond yields increased. Benchmark Treasury yields settled at 4.683%, reaching levels not seen since October 2007. This rise in yields has also led to a strengthening of the dollar against other currencies. However, this strength is causing concerns for global central bankers, who are trying to balance inflation and economic growth.
Meanwhile, the tech sector has experienced a decline in valuations. The so-called Magnificent Seven tech stocks, including Apple, Microsoft, Alphabet, Amazon.com, Nvidia, Tesla, and Meta Platforms, have seen a 20% decline in aggregate valuations over the past two months. This is compared to a 12% decline in the overall S&P 500's valuation. Despite this, the tech-heavy Nasdaq managed to rise 0.7% on Monday.
It's important to keep an eye on these developments as they can have a significant impact on the stock market and overall investor sentiment. The bond market, which has traditionally been a supportive force for stocks, is no longer as friendly as it used to be. Higher inflation and hawkish central banks are changing the dynamics of the market.
As always, it's crucial to stay informed and make decisions based on the current market conditions. I hope this update has provided you with valuable insights into the recent happenings in the financial world.
Best regards,
Daniel Silva
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