Resumo do Relatório

‘Low for much longer’ environment for global interest rates remains…

29/04/2021
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Bolsas Internacionais Crédito Soberano Debt Dívida Estados Unidos Estratégia em ações Estratégia Global Macro Internacional Macroeconomia Multiativos Globais Renda Fixa Taxa de Juros

This report by Nuclo Independent CIO head of global equities Claudio Brocado was originally published on October 9, 2014. The level of interest rates has changed some, as have many of the assumptions currently embedded in global markets, but the thesis itself remains largely intact. The original report title was “What are 2.3% 10 year US Treasury yields really telling us?,” as that’s where interest rates in the benchmark US government had landed. The consensus then was that the economic outlook was deteriorating, so that such a ‘low’ interest rate was predicting a softer global economy.

The yield on that key fixed-income security did largely navigate around that level for much of the subsequent multi-year period, finally decisively plunging to new lows as the coronavirus COVID-19 pandemic contributed to somewhat a regime change — what we called a shift from “lower for longer” to “low for much longer.” US markets are now discounting a year (if not two) of extraordinarily strong economic growth. Yet, some of the very same market participants who once fretted about 2.3% yields heralding a severe slowdown and pending deflation switched to in recent weeks seriously worry that 1.75% may be predicting that an over-heated economy will bring about the return of meaningful inflation.

We believe long-term investors should not obsess with the apparently-unfolding macro backdrop. The pendulum of sentiment seems to invariably swing too far in both directions (fearing recession/deflation to not long thereafter worry about overheating/inflation). The reality of the last few years, even despite the pandemic, tends to remain quite distant from the two extreme theoretical scenarios.

The ‘goldilocks’ environment in global interest rates — when it comes to its implications for long-term equity investing –remains firmly in place, in our view. Even if we were to return to the 2.3% range in US 10Y Treasuries, that level would still be quite supportive of equity valuations. The key, in our opinion, is that the slope of any such rise remains gentle. Too quick a surge to 2.3% would obviously cause short-term disruptions, but should also reveal plenty of long-term buying opportunities. Equities remain the place to be for the next few years, but stock-selection should be as important as ever nonetheless.

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