Investment expert warns: The anomalous figure threatening to bring down stocks
Yields in the USA have crossed a worrying threshold and offer a low-risk alternative. At the Poriya investment house, they analyze the impact of geopolitical tension and identify the point at which it is worth selling dollars.
Or Poriya, Chairman of Poriya Finance investment house, held a weekly economic review this morning (Tuesday), addressing the market correction, geopolitical developments, the bond market, the stock market, and the foreign exchange market.
"Financial markets have been showing a certain correction in recent days. After the renewed recovery in the chip sector, investors' attention is now focused on two central arenas: geopolitical developments and the bond market," Poriya stated.
In the geopolitical arena, the exchange of belligerent statements between the USA and Iran continues to support rising oil prices, and at this stage, there are no real signs of an approach to an agreement between the parties.
At the same time, the US debt market continues to weaken, especially in the long part of the curve. The yield on 10-year US government bonds has already crossed the 4.7% threshold, while the yield on 30-year bonds has risen above 5.3% — anomalous levels not seen in this market for nearly two decades.
The rise in yields has direct significance for the stock market:
-
It increases the financing costs of companies, which may weigh on business activity and profitability.
-
At current yield levels, the bond market offers investors a relatively attractive investment alternative with significantly lower risk compared to the stock market.
As long as we do not see a significant decline in bond yields, they are expected to continue to be a burden on the stock market.
The influence of recent developments is also evident in the foreign exchange market, as the shekel has weakened to some extent against major currencies. Simultaneously, the dollar itself has weakened in recent weeks against the euro and the pound. However, if market declines resume or deepen, we estimate that demand for the dollar as a safe-haven currency may return.
Despite short-term volatility, there is no change in our assessment for the medium and long term: the shekel is expected to return and strengthen against leading currencies. Accordingly, a significant strengthening of the dollar, euro, or pound against the shekel may be an opportunity for selling foreign currency.
