Gross, Dalio, Gundlach…Minerd?

This week’s Idea Farm links to a couple research sources I don’t hear much about, but are high on my reading list – aiCIO and Guggenheim’s Scott Minerd.  We are pairing the two this week since aiCIO has a profile piece of Minerd (with a drawing of Minerd in a Toga).  Minerd is the CIO of Guggenheim, which in addition to lots of other initiatives like buying the Dodgers, runs a bunch of ETFs.  (They just shut nine ETFs this week, including curiously, three over $20mln.)

Below are a few charts before the download:


“Empirical studies suggest that an increase in the Treasury yields does not necessarily lead to weaker equity performance. When yields on the 10-year note remain below 4%, the correlation between S&P 500 monthly returns and changes in 10-year yields are positive, which implies that when yields rise, equity prices move higher as well. An increase in interest rates from a low level is likely to be the result of more robust economic activity, which is positive for equity performance. When the 10-year Treasury yield climbs above 6%, the correlation inverts, with increasing yields leading to decreasing equity prices. This occurs because of the affiliated rise in the inflation premium, which is negative for input prices and earnings, putting downward pressure on equity prices. Given that the 10-year Treasury yield is currently around 1.83%, for now, any potential rise in yields should result in an increase in equity prices.”


Download the content here:

The Keynesian Depression

Echoes of 2004

High Yield and Bank Loan Outlook

Escape Velocity for the Economy