Where To From Here?
From The Maven Letter: 26 October 2023Â
It’s rough out there. Gold has held its recent gains, trading today around $1980 per oz., but gold stocks still can’t attract investor interest. Investors just don’t see enough risk on the horizon to start positioning for it.
In the meantime, the 10-year yield bested 5% on Monday for the first time since global economic strengthen fueled by the rise of China dimmed interest in Treasuries enough that yields briefly reached 5% back in 2006.
Today it’s not such a simple story. Economic strength is playing a role in pushing yields higher – investors continue to favour stocks to bonds – but structure oversupply is the bigger factor.
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That the pool of buyers for US Treasuries is shrinking while America’s need to issue debt keeps rising is a slow change. And feel free to opine against this statement but I think it will be very difficult to wean America off its reliance on debt: it’s unlikely Congress can materially cut spending or raise taxes. Republicans will hold firm against tax increases, Democrats will hold firm against cuts to entitlements, military spending is unlikely to go down, and
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