Despite the Federal Reserve (Fed) significantly cutting interest rates by 2 percentage points in September to officially launch an easing cycle, the 10-year US Treasury yield, which has the title of "anchor of global asset pricing", has continued to rise since September, reaching 4.26% today (24th), approaching the high point in July, and some institutions have even forecast that the US 10-year bond yield will return to 5% next year.
Why has the US bond yield continued to rise?
Why has the US bond yield continued to rise despite the Fed launching an interest rate cut cycle? Experts analyze the possible reasons:
- The US Treasury Department continues to issue debt to fill the government's fiscal deficit (plus some are concerned that if Trump returns to the White House, the US fiscal deficit may increase again)
- The Fed is trying to shrink its balance sheet, eliminating a large amount of demand for government bond purchases
- Recent economic data shows that the effectiveness of fighting inflation remains stagnant
The four major US stock indices all fell
Against this backdrop, coupled with some companies reporting Q3 earnings that were worse than expected, the major US stock indices generally fell on the 23rd, with the Dow Jones Industrial Average plunging 409 points, the largest single-day decline in more than a month.
- The Dow Jones Industrial Average fell 409.94 points, or 0.96%, to 42,514.95 points
- The Nasdaq Composite fell 296.48 points, or 1.6%, to 18,276.65 points
- The S&P 500 index fell 53.78 points, or 0.92%, to 5,797.42 points
- The Philadelphia Semiconductor Index fell 59.34 points, or 1.14%, to 5,131.37 points
In individual stocks, due to the E. coli outbreak, McDonald's stock price plummeted more than 5%; Apple and Nvidia's stock prices fell more than 2%; Meta, Netflix, and Amazon also fell about 2-3%.
However, after Tesla's Q3 earnings report, although revenue was slightly lower, the stock price soared 12% in after-hours trading due to better-than-expected profits.
Goldman Sachs: The golden decade of US stocks is over
Just earlier this week, Goldman Sachs' investment portfolio strategy research team released a report stating that the "golden decade" of the S&P 500 index has ended.
The team estimates that the annualized nominal return rate of the S&P 500 index will be 3% over the next 10 years, far lower than the 13% annualized return rate over the past decade. Therefore, it is estimated that the performance of US stocks in the next 10 years may not be able to outperform other assets.
As for the five main reasons why Goldman Sachs is bearish on US stocks:
- Stock market valuations are at historical highs, with the S&P 500 index's cyclically adjusted P/E ratio currently at 38 times, ranking in the 97th percentile.
- The market is highly concentrated, with the performance of the broad index largely dependent on a few tech giants.
- The US economy is expected to experience more frequent contractions over the next decade.
- It is difficult for any company to maintain high revenue growth and profitability in the long run.
- The relatively high US 10-year bond yield has led investors to adjust their expectations for the Fed to cut interest rates.
If US stocks perform as Goldman Sachs has forecast, in the short term, due to the recent rise in the correlation between Bitcoin and US stocks, there may also be downside risks...
