Does Opportunity Beckon?
Two economists are walking down the street. One spots a $100 bill on the ground.
"Hey," he says to his friend, "There's a hundred bucks lying on the ground!"
"Don't be silly," the other replies, "If there were a hundred dollars on the ground, someone would have picked it up already!"
Academia likes to believe markets are efficient, but after the bond market action last month I am convinced that there are stocks to be bought that are like those $100 bills waiting to be seized.
Last month, 10 year government yields around the world declined on average by about a quarter of a percent. That might not sound like a lot, but with the U.S. 10 year Treasury bond only yielding 2.14 percent and the German 10 year yielding NEGATIVE 23 basis points (100ths of a percent) a move of a quarter percent is a lot!
Despite this decline in competing yields the S&P 500 declined 6% for the month of May. I get how the cyclical stocks that are most exposed to global trade tensions are down, but there are plenty of stocks in domestic, recession-resistant, recurring revenue businesses that mathematically should have higher valuations as a result of the bond yield decline.
Too often speculators are trading the stock market rather than a market of individual stocks.
About the Author
Manny Weintraub, CFA, is the President of Integre Asset Management, a New York-based registered investment adviser, that combines investments in industries benefiting from long-term trends with the use of active management to reduce risk. A former Managing Director of Neuberger Berman, where he co-managed more than $1.5 billion in U.S. equity assets, Manny is an experienced portfolio manager and contrarian investor. A graduate of the University of Pennsylvania, he serves on the boards of The Atlantic Theater, and North Country School – Camp Treetops. To learn more about Integre, please visit www.integream.com.
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