Monday, 4 November 2013

Stocks and bonds set for rally

Two articles from Bloomberg suggest that stocks and bonds are likely to see gains ahead.

First, on stocks:

The broadest equity rally on record will pick up speed through year end and lift the Standard & Poor’s 500 Index to the biggest annual increase in 16 years, if history is any guide.

Shares have climbed in the final two months 82 percent of the time since 1928 when the benchmark gauge advanced at least 10 percent through October, data compiled by S&P and Bloomberg show. The mean November and December increase of 6 percent would boost the index to 1,862.79, an all-time high that is about 20 percent above the record 1,565.65 set in 2007...

The benchmark gauge for American equities gained 23 percent from January to October...

And on bonds:

Deutsche Bank AG was one of the few firms surveyed by Bloomberg in January to correctly predict the worst rout in the U.S. Treasury market since 2009. Now, Germany’s largest lender says it’s time to buy.

“The economy isn’t growing as strongly as we’d hoped,” Dominic Konstam, the New York-based global head of interest-rate research at Deutsche Bank, said in a telephone interview on Oct. 28, one day before a measure of U.S. consumer confidence plunged by the most in more than two years...

Konstam isn’t alone. Firms from ING Groep NV to SEI Investments Co. have boosted their holdings of Treasuries since September as growth prospects diminished, while a weekly survey by Stone & McCarthy Research Associates showed the proportion of U.S. government debt held by money managers increased in the week ended Oct. 29 from the lowest since June 2012.

However, there is no consensus on where yields are headed.

The four other firms that joined Deutsche Bank in correctly predicting at the start of 2013 that Treasury yields would rise, including Jefferies Group LLC and Credit Agricole SA, are all forecasting higher U.S. borrowing costs by year-end.

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