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Bonds are a better investment than stocks in the current environment, says Warren Pies. He’s the Founder of 3Fourteen Research.Why does Pies find equities less attractive?Members of the FOMC did not actively discuss cutting rates in the near term in their most recent meeting, as Invezz reported here.What it suggests is that we’re in a “Fed Pause”, as per Warren Pies – a backdrop that has historically favoured both bonds and stocks. Still, the 3Fourteen expert actually sees bonds as a safer bet for now than stocks.
Our positioning, to be clear, is we’ve been riding bonds over stocks. I think there are more paths to victory with the bond position here versus the stock position.
Note that the S&P 500 has already gained over 10% since late October.U.S. stocks have priced in a soft landingPies agreed that a soft landing which tends to be a positive for equities is a real possibility but said the related benefit is already priced in.Market currently pins the possibility of a rate cut in March at 33% which the 3Fourteen analyst sees as a bit too over-optimistic. On CNBC’s “Closing Bell”, he noted:
There’s a setup for disappointment. You have economic reality competing with what markets are pricing in. I think markets get ahead of themselves in this cycle and we’re seeing that again.
Yield on the U.S. 10-year Treasury Bond ended this past week at 4.408% versus the high of about 5.0% in October.
🇨🇳 | China continues to sell its U.S. Treasury bonds, which now amount to US$ 805.4 billion, 40% less than ten years ago. 1/2 pic.twitter.com/GEQc3lbvy6
— Dongsheng News (@DongshengNews) November 18, 2023
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