Stocks kept that November momentum going but can a move higher in interest rates derail it?
November was one of the best months ever for stocks and that momentum carried over into the first week of December. The reasons continue to be investors looking past the winter season and focusing on spring 2021 and beyond. Another reason for the move higher has to be the amount of liquidity provided by these global central banks that continue to expand their balance sheets.
For the week ahead, let us keep an eye on interest rates. The 10-year Treasury is approaching 1%, this is an increase of over 40 basis points or 4 10ths of one percent since the beginning of August when it was roughly at .52%. So, do we cross over 1%? If yes, how does the market react? Additionally, the 10-year/2-year interest rate spread is also widening and is currently at a level we haven’t seen in years - if this continues in an accelerated fashion it could cause trouble for stocks as it has in the past and shown on the graph here.
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