Polls and predictive models failed to predict Trump’s strength let alone his win.
That’s nothing. Wall street analysts and economists have been getting the rate thing wrong for years, and not by a little.
Bloomberg reported hardly anyone on Wall Street saw the recent rate run coming. None of the 65 analysts surveyed by Bloomberg said 10-year yields would rise above 2 percent by year-end. And it’s happened before: When the 10-year yield doubled from 1.5% to 3.0% in the 2nd half 2013, not one expert surveyed at the 60 venerable banks and securities companies by Bloomberg anticipate lower rates. Bloomberg surveyed where the 10-year Treasury yield would finish 2014. Economists forecasted 3.41% average. It finished at 1.9%!
Sometimes, it’s that quiet guy–or gal!–working in anonymity, not seeking the light, who does a fare job (or better) of making Big Calls.
October 3, 2016: I speculated TNX would rise and pull banks higher based my observation of the quiet/quick sell-off of REITs + MUB one Monday. This plus continued deterioration in interest-rate sensitive stocks within IYR and XLU. The 10 year ran 44% higher and with it XLF +15%.
July 5, 2016: I speculated TNX and USD were done going down on July 5th and GLD should reverse. Since then the 10 year has risen 68% (100 basis points off the bottom) and Gold has given up 50% of it’s outsized move this year.
January 28, 2015: I had 1.4% as price target for TNX with TLT reaching $145 in time. Both hit July 7, 2016.
January 12, 2014: I speculated that 10 year rise to 3% would pull back. It did, all the way back to 2012 lows of 1.5%, a 100% retracement.
May 1, 2013: I speculated the 10 yr would rise from 1.6% to 2.5% and stocks would surge. I didn’t know it would move 50% in 62 days. It tagged 3% twice before reversing. SPY closed 2013 up 32%.
My point is NOT to toot my own horn. It’s to call attention that Technical Analysis, especially when combined with Macro/Economic, Fundamental, Intermarket and Sentiment analysis has often very powerful predictive powers.
Technical Analysts are not Pollsters or Economists
Back in April, I posted this chart of the 10 year Treasury Yield TNX and presented my analysis to the Boston Investor’s Group at MIT, suggesting that if rates stayed above a Quarterly Close of 1.42%, then rates were set for higher. (And that was not based on Trump, economic health, US dollar or FED!) Based on that nice inverse Head & Shoulders on this Quarterly chart, my price targets were 2.21% by year end then 3.03% mid 2017. That’s when it runs into Quarterly Trend line resistance which should be formidable. Until it isn’t. Beyond 3%, it is not hard to imagine a measured move from that inverse head & shoulders to 4% then 5% and in time to 6%, but it needs a few years. Unless the 1946 analog teases out.
That’s all I’m gonna say about that.
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