The world bond market continues to send very strong signals that US treasuries is the worst place to be on the planet to park/invest your cash (albeit up there with the worst). For whatever reason US Treasuries are underperforming:
- emerging market bonds
- junk grade corporate bonds
- international govt. bonds
- investment grade corporate bonds
At multi-week highs and with no deterioration in upside momentum it would appear that US Treasuries have got a whole lot more underperformance left in them. After the 5% fall in Shanghai yesterday it was interesting to note just how much US Treasuries didn’t outperform their “more risky” counterparts. This even surprised us!
What are the implications of these graphs above? Risk seeking/taking, yield seeking (call it what you will) is still alive and well. This implies that we are likely to see continued strength in commodities (albeit a move to multi-week highs), emerging market currencies, and equities. Obviously this implies weakness in the USD and US Treasuries.
Our wealth creation portfolio is up 15% from the beginning of the year with approximately 40% of the volatility of the S&P 500.
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