The 10 year treasury yield briefly touched 1.60% and the equity market reacted very violently. The hardest hit stocks continue to be technology names and the cause could be a rising discount rate. When investors try to find fair value for a stock, they use the capital pricing asset model/discounted cash flow valuation methods. In these models, the risk free rate is pegged to the 10 year treasury yield, and when interest rates move higher, the net present value of a company’s cash flows moves lower. In other words, higher interest rates mean lower stock prices.

It goes without saying that risk assets are worth less in an inflationary environment and investors will re-balance toward cyclical and other stocks if interest rates move higher. Get ready for the great rotation of 2021.

Disclosure There are risks associated with investing in securities. Investing in stocks, bonds, exchange traded funds, mutual funds, options and money market funds involve risk of loss. Loss of principal is possible. Some high risk investments may use leverage, which will accentuate gains & losses. Foreign investing involves special risks, including a greater volatility and political, economic and currency risks and differences in accounting methods. A security’s or a firm’s past investment performance is not a guarantee or predictor of future investment performance.

Copper Canyon LLC is a State of Florida Registered Investment Advisor. More information can be found about our firm by visiting and typing Copper Canyon LLC into the search box.

All information detailed should not be interpreted as investment advice and you should do your own research before making an investment decision. CRD# 286061. Dylan Quintilone CRD#6732024, Paul Clay CRD#7145606.
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