I officially can check off the one thing that I believed if we couldn’t get to in 2021, it would have been a terrible disappointment. The 10-year yield just flashed a 1.33% print. Why is this important?
From CNBC: https://www.cnbc.com/quotes/US10Y
Higher bond yields mean better growth and inflation prospects ahead. This is exactly what we wanted to see in America. Last year before the 10-year yield collapsed, I talked about recessionary yields should be between -0.21% – 0.62% on the 10-year yield. We traded as low as 0.32% on March 9th. Now, for the most part, we stayed above 0.62%, and in my own crazy old man Logan way, that was the bond market whispering in my ear we were going to be ok. Since early August, this chart has been a work of art.
My entire AB economic model last year which was written on April 7th, 2020 and retired on December 9th, 2020 needed the 10-year yield to get to 1% in 2020. We got to 0.99%, close enough.
The Economic Model can be found here:
However, the real goal, which I thought couldn’t be the case last year, is to start a range between 1.33% -1.60%. This is going to take some time and work. The high-level forecast for yields in 2021 was 1.94%. We still have a massive amount of work to do in America. There is no way we can get back to the total solid economic data that we had last February before Covid19 hit us while Covid19 is still here. However, every day we are vaccinating more people, and more disaster relief is on the way. When that ends, we can do a real stimulus plan that Covid19 won’t hinder, and we get every American back to work.
Can yields fall from here at 1.33%, yes! Even from here very quickly too.
Is the stock market due for a real correction? Yes, and that can rally bonds!
However, let the 10-year yield be your guide that we will be ok; we need more time to vaccinate more Americans. The demand for labor will come, and the stall in jobs gains we see now is just the calm before the jobs storm.
When school is open for everyone, those who left the labor market to take care of their kids can go back to work if they want to. While I know the permanent jobs loss seems very big, I truly believe that we can get back to February 2020 jobs data with all my heart. We just need more time and until then disaster relief is a must.
From AdvisorPerspectives: https://www.advisorperspectives.com/dshort/updates/2021/02/08/the-big-four-economic-indicators-january-employment
The next goal is 1.60% on the 10-year yield. Until then I will leave you with the words I said back on April 7th, 2020
“I believe the months of April and May are going to tell an epic story of America’s start in defeating this virus. If we do this right and document the cause and effect of our efforts, future generations will be able to look to this period in time for how to handle a global pandemic.“
“My faith in America winning has never let me down because I always believe in my people and country. I can tell you now, this virus isn’t changing my view on that.”
Logan Mohtashami is a Lead Analyst for Housing Wire, financial writer, and blogger covering the U.S. economy with a specialization in the housing market. Logan Mohtashami, now retired, was a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1987.