Global Markets Rocked While Interest Rates Drop

It looks like we will begin the day with another stock market drop in the U.S. On a historical basis when stocks have dropped interest rates have fallen as folks move to ‘safe haven’ assets. This had not happened in the last few days, but today it looks like rates will drop by a fair amount as the 10 year treasury is trading at 2.73% after closing yesterday around 2.82%.

At this time we are not overly concerned with market movements–not just because we have mostly escaped damage, but because while these large point drops make headlines the movements are not overly crazy–remember we have had so many days in the last year with rises of 200 or 300 Dow points. The bigger damage is done to investors who are somewhat new to investing–each time we have market moves like this it takes years to get these folks back in the market after they are spooked and choose instead to move to cash for no return–a lot it can be blamed on the sensational headlines the media puts out.

It will be interesting to see how income securities react to the interest rate drop. Will they bounce a little? Or will the equity downdraft cause a “throw the baby out with the bath water” reaction with even preferred stocks and baby bonds falling off?

We shall watch closely with interest today as we have for almost 50 years now. The markets never fail to ‘entertain’ us and contrary to the know-it-alls on the TV we find there are always things to learn.

2 thoughts on “Global Markets Rocked While Interest Rates Drop”

  1. Hi Leonard–I don’t know Elder but maybe he is right (and maybe not). I can’t really pretend to forecast macro moves in the market.

    I like NRZ, WSR, STAG and O on your list, but I would have KIM and SKT on the list (I am watching those 2 REITs).

    I would be watching the fixed-to-floaters in preferreds–I don’t have a list on this website yet, but the list is here–

  2. I got an email from Alexander Elder today and he says, regarding the market,

    “I think this is the start of a serious correction. Typically a double bottom. First a severe stab down (which is what we got), then a feeble rebound rally, then a slide into a scary but lower volume second bottom a month or so later. And then the bull market resumes, having shaken out a whole lot of people in that correction. I would sit tight and work on a shopping list.”
    I’d rather bypass the 2nd bottom if possible but I am working on my shopping list. I will only pick a couple from the following list if and when conditions are right, so would appreciate feedback from others here. My list so far is: FMO, REM, NRZ, WSR, MPW, STAG, O, MORL, EPD. Probably should add some preferreds and baby bonds too, but I’m already heavily loaded up with them.

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