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Yahoo
11-07-2025
- Business
- Yahoo
The riskiest corner of the bond market is pointing to continued strength of the US economy
The high-yield bond market is suggesting that the outlook for companies and the economy is strong. Yields on the bonds are down, suggesting investors don't see much reason to worry about what's ahead. This risk-wary market is just as bullish on the American economy as stocks," DataTrek said. Anyone worried about the US economy can look to an unexpected corner of the market for reassurance. High-yield bonds, issued by companies with below-investment-grade credit ratings, are flashing signs that investors don't see much trouble ahead for these companies. DataTrek Research this week flagged that high-yield bond spreads—essentially the yield paid to investors over a benchmark like Treasurys—are low. When spreads are wider, it suggests investors see more risk ahead and are demanding higher compensation to hold the bonds. Yet, even with the possibility of President Donald Trump's sweeping tariffs raising inflation and negatively affecting the economy, high-yield bond investors are calm. "US High Yield corporate bond spreads are now lower than at any point in 2021. This risk-wary market is just as bullish on the American economy as stocks," DataTrek co-founder Nicholas Colas said. Colas noted that in 2021, markets were bullish on the prospects for the economy as the US began climbing out of the pandemic and households and companies were flush with stimulus cash. He compared the current strong performance of high-yield corporate debt to large-cap stocks, which are also riding a wave of bullish enthusiasm among investors. "Given that bond investors are a more cautious lot than their equity market counterparts, that is a bullish signal for stocks," he said. Elsewhere in the bond market, Treasury yields have edged up this week as Trump fired off a fresh salvo of tariff updates, most recently threatening Canada with 35% tariffs starting on August 1. Yet, some investors aren't worried. Steve Eisman, known for his role in "The Big Short," said this week that Treasury yields have been basically tranquil since 2022, indicating investors aren't worried about things like the deficit or mounting US debts. Read the original article on Business Insider
Business Insider
11-07-2025
- Business
- Business Insider
The riskiest corner of the bond market is pointing to continued strength of the US economy
Anyone worried about the US economy can look to an unexpected corner of the market for reassurance. High-yield bonds, issued by companies with below-investment-grade credit ratings, are flashing signs that investors don't see much trouble ahead for these companies. DataTrek Research this week flagged that high-yield bond spreads—essentially the yield paid to investors over a benchmark like Treasurys—are low. When spreads are wider, it suggests investors see more risk ahead and are demanding higher compensation to hold the bonds. Yet, even with the possibility of President Donald Trump's sweeping tariffs raising inflation and negatively affecting the economy, high-yield bond investors are calm. "US High Yield corporate bond spreads are now lower than at any point in 2021. This risk-wary market is just as bullish on the American economy as stocks," DataTrek co-founder Nicholas Colas said. Colas noted that in 2021, markets were bullish on the prospects for the economy as the US began climbing out of the pandemic and households and companies were flush with stimulus cash. He compared the current strong performance of high-yield corporate debt to large-cap stocks, which are also riding a wave of bullish enthusiasm among investors. "Given that bond investors are a more cautious lot than their equity market counterparts, that is a bullish signal for stocks," he said. Elsewhere in the bond market, Treasury yields have edged up this week as Trump fired off a fresh salvo of tariff updates, most recently threatening Canada with 35% tariffs starting on August 1. Yet, some investors aren't worried. Steve Eisman, known for his role in "The Big Short," said this week that Treasury yields have been basically tranquil since 2022, indicating investors aren't worried about things like the deficit or mounting US debts.
Yahoo
08-07-2025
- Business
- Yahoo
The 'new normal' of growth stock dominance
It pays to be big. And it's a good time to be on team growth. A key insight from recent years — from the pandemic crisis through the "Liberation Day" turmoil — is that the most well-capitalized and growth-oriented names are outperforming their counterparts. Investors who tend to favor small-cap and value stocks, because of their time horizon, risk appetite, or other preferences, might point to earlier periods of trading to show the merits of their strategy. By subscribing, you are agreeing to Yahoo's Terms and Privacy Policy Last year notably featured glimmers of a small-cap revival. A broadening of the stock market rally, optimistic economic forecasts, and expectations of Fed rate cuts bolstered the case for the double-A and triple-A tickers that don't always get the major league limelight. But the call for small caps turned out to be short-lived, ill-suited for the trade conflicts of 2025 and the wait-and-see posturing of the central bank. In fact, the performance gap between US large and small caps has widened considerably over the last two-and-a-half years, according to a new analysis by DataTrek co-founder Nicholas Colas, who wrote in a recent note to clients that the duration of the relative outperformance suggests it's structural rather than cyclical. "Relative return data suggests that there is a 'new normal' at play in US stock markets, one where large caps and Growth have the upper hand versus small caps and Value," he wrote. "Moreover, enough time has passed that these differences look durable rather than being temporary anomalies." Big Tech's steadfast march to higher valuations has played a major role in the stock market's lopsided behavior. But the growth of the Magnificent Seven is only part of the story. While a broadening rally hasn't unfolded in the way small-cap proponents had hoped, the spoils of AI excitement have flowed to many other players aside from the mega-rich tech platforms. As my colleague Josh Schafer has reported in this newsletter, AI chip and data center trades not named Nvidia (NVDA) have posted some of the highest gains in the S&P 500 (^GSPC). Investments in AI energy and cloud tickers have payed off too. That's probably cold comfort for close watchers of the Russell 2000 (^RUT), which has underperformed the broader market this year, posting a loss of about 1% compared to the S&P's 6% gain. It's difficult to imagine market sentiment shifting away from Big Tech, especially amid the fresh trade uncertainty unleashed on Monday. Rejuvenated bulls see even greater gains ahead, motivated in part by the seeming invincibility of the tech trade, itself a kind of defensive play to weather realigned global trade. For a certain investor, large caps and growth names have been a part of the portfolio worth prioritizing and fussing over. Halfway into this pandemic decade and this chaotic trading year, they are increasingly the only one. Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on X @hshaban. Click here for in-depth analysis of the latest stock market news and events moving stock prices Sign in to access your portfolio
Yahoo
08-07-2025
- Business
- Yahoo
The 'new normal' of growth stock dominance
It pays to be big. And it's a good time to be on team growth. A key insight from recent years — from the pandemic crisis through the "Liberation Day" turmoil — is that the most well-capitalized and growth-oriented names are outperforming their counterparts. Investors who tend to favor small-cap and value stocks, because of their time horizon, risk appetite, or other preferences, might point to earlier periods of trading to show the merits of their strategy. By subscribing, you are agreeing to Yahoo's Terms and Privacy Policy Last year notably featured glimmers of a small-cap revival. A broadening of the stock market rally, optimistic economic forecasts, and expectations of Fed rate cuts bolstered the case for the double-A and triple-A tickers that don't always get the major league limelight. But the call for small caps turned out to be short-lived, ill-suited for the trade conflicts of 2025 and the wait-and-see posturing of the central bank. In fact, the performance gap between US large and small caps has widened considerably over the last two-and-a-half years, according to a new analysis by DataTrek co-founder Nicholas Colas, who wrote in a recent note to clients that the duration of the relative outperformance suggests it's structural rather than cyclical. "Relative return data suggests that there is a 'new normal' at play in US stock markets, one where large caps and Growth have the upper hand versus small caps and Value," he wrote. "Moreover, enough time has passed that these differences look durable rather than being temporary anomalies." Big Tech's steadfast march to higher valuations has played a major role in the stock market's lopsided behavior. But the growth of the Magnificent Seven is only part of the story. While a broadening rally hasn't unfolded in the way small-cap proponents had hoped, the spoils of AI excitement have flowed to many other players aside from the mega-rich tech platforms. As my colleague Josh Schafer has reported in this newsletter, AI chip and data center trades not named Nvidia (NVDA) have posted some of the highest gains in the S&P 500 (^GSPC). Investments in AI energy and cloud tickers have payed off too. That's probably cold comfort for close watchers of the Russell 2000 (^RUT), which has underperformed the broader market this year, posting a loss of about 1% compared to the S&P's 6% gain. It's difficult to imagine market sentiment shifting away from Big Tech, especially amid the fresh trade uncertainty unleashed on Monday. Rejuvenated bulls see even greater gains ahead, motivated in part by the seeming invincibility of the tech trade, itself a kind of defensive play to weather realigned global trade. For a certain investor, large caps and growth names have been a part of the portfolio worth prioritizing and fussing over. Halfway into this pandemic decade and this chaotic trading year, they are increasingly the only one. Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on X @hshaban. Click here for in-depth analysis of the latest stock market news and events moving stock prices
Yahoo
28-06-2025
- Business
- Yahoo
The S&P 500 just hit a new record — why it could keep surging
The S&P 500 (^GSPC) just hit its first record close since early February, which means a familiar talking point is also back in the market discussion. The S&P 500's valuation is back above both the five- and 10-year averages. This is often used as a way to describe stocks as "expensive." But as we've pointed out in the past, just because valuations are high doesn't mean they can't stay high for an extended period of time. It also doesn't mean they can't keep moving higher. The chart below from Exhibit A co-founder Matt Cerminaro shows that when splitting the S&P 500 into deciles organized by least and most expensive, the current market is far less expensive than the peak of the 2021 stock boom. For instance, the average stock in the most expensive bucket is trading at a 63 times forward 12-month price-to-earnings ratio, well below the 104 times forward earnings seen back in 2021. "Price earnings multiples are a function of investor confidence, which is a constantly moving target and has very little in the way of natural limits on either the upside or downside," DataTrek co-founder Nicholas Colas wrote in a note to clients on Wednesday. The S&P 500's most recent record close comes as the market has rallied more than 23% from its April 8 bottom. Now, strategists believe the market's largest tariff fears are behind investors. Economic forecasts have once again begun reverting higher, along with projections for corporate earnings this year. And Wall Street strategists are becoming incrementally bullish on the outlook from here. No fewer than 11 Wall Street firms lowered their S&P 500 targets amid the market sell-off in April. At least eight of those have since raised their bets on where the index will end 2025. The latest was BMO Capital Markets chief investment strategist Brian Belski, who raised his year-end target to 6,700 from 6,100 on Tuesday. "The signposts we called out in April are largely in place – markets are transitioning TO 'show me' FROM 'scare me,"' Belski wrote. "We believe performance is broadening, reactions from daily rhetoric are calming, and actual corporate guidance will increase coming out of the 2Q earnings reporting period." Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
