The Ten-Year Treasury Breaks Through 1.6%; The Market Surges! What Happened? January 3, 2022

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Last summer, talking heads over at CNBC were talking the market down, worried about the ten-year Treasury heading higher, the first stop, 1.6% and then the second stop: 2.0%.

All of a sudden, the ten-year Treasury hits 1.6% (and trending higher) and CNBC talking heads are even suggesting we will see 2% before summer and yet the market surges. 

So, what happened? What changed?

The narrative changed (see third major data point below), but more importantly, a lot of other stuff  also changed. Even Steve Liesman sounded bullish this morning.

The Fed:

• at worse, the Fed raises the rate three times this year, but rates will still be very, very low
• tea leaves right now suggest that the Fed will raise rates only once this year
• regardless of how many times the Fed raises rates, Jay Powell will be watching risk of recession and the midterm elections very, very closely

My favorite chart

• link here;
• lots and lots and lots of money on the sideline;

The narrative has changed:

• this is the new narrative on CNBC: inflation can only be beat by investing in US equities

Covid-19, newest variant:

• cases are already peaking in some countries, specifically South Africa where it was first detected
• if so, this surge is just like previous surges; lasts about ten days to hit peak and then begins to recede
• regardless: severity of this variant is similar to a "cold"; hospitalizations are not rising
• there is every indication this is the beginning of the end of  Covid-19 (by the way, if it is, President Biden can take this into the mid-terms arguing he ended Covid-19 as he promised)

Tesla:

• blew out analysts' forecast; risk-on investing back in vogue

AAPL:

• broke through resistance to hit $3 trillion market cap

Waiting for "guidance":

• investors were waiting to see which way the market would head on first day of trading in new year
• with risk-on trading back in vogue, new highs were set in early afternoon trading

WTI:

• up again, and every indication producers will watch this closely;
• up 1.5%; trading at $76.35

Weather:

• although the South is finally getting a bit of winter, all indications are this is going to be a mild, mild winter in the US;

Supply chain issues:

• we're easily through the worse; holidays are over, and "we" have six months to prepare for summer

Mid-term elections:

• incumbents won't want to upset the apple (no pun intended) cart
• Nancy Pelosi just put millions in to Disney, Roblox, and Alphabet (GOOG)
  

Temporary:

• a lot of folks sold at the end of the year (2021) to take losses for tax purposes;
• now, first day of trading in the New Year and folks are putting that cash to work

Short term:

• now that we see which way the market is headed temporarily, that opens up short term, and short term: FOMO