Don’t fear rising yields
As of this writing on Friday morning, the yield on the 10-year Treasury stands at 1.65%. Yesterday it passed 1.7%.
These are the highest readings we’ve seen since the spring when the 10-year rate hovered around 1.75%. As you probably remember, this surge in yields caused a crash in tech stocks.
Why don’t we see a similar collapse in tech stocks today?
In fact, the tech-rich Nasdaq is up more than 6% since the first week of October. Over the same time period, the 10-year yield has fallen from around 1.5% to 1.65% today.
What’s going on here?
Here is the quick response from our hypergrowth expert, Luke Lango:
This has profound implications for technology investors.
Today, let’s turn to Luke for a better understanding of the confusing relationship between returns and growth stocks. Next we’ll see why he thinks a small subset of elite stocks is about to skyrocket 5Xâ¦ 7Xâ¦ or even 10X or more in the long term.
Have a nice week end,
These specific stocks could double in 2022
By Luc Lango
Something very interesting happened in the stock market yesterdayâ¦ something that most people missed or didn’t pay much attention toâ¦ but that could help you achieve 100% returns in 2022 .
Here is what happened : Growth values and the yield on the 10-year Treasury both increased.
I bet a lot of you are saying: So what!? And I get this answer. But understanding that it happened – and understanding why it happened – could help you find the stocks best positioned to double next year.
Follow me here …
As you probably know, growth stocks and the 10-year Treasury yield were strongly negatively correlated in 2021. Reasonably.
Recall from your Finance 101 lesson. As returns rise, discount rates rise and the net present value of a company’s future cash flows decreases.
Growth stocks (unlike value stocks) rely heavily on these future cash flows to justify their current valuations.
So, throughout 2021, when yields rose, growth stocks tended to fall, and vice versa.
But not yesterday.
Yesterday, growth stocks rallied sharply, alongside the 10-year Treasury yield, pushing higher towards 1.7%.
It should be noted that this phenomenon is not new. In October, growth stocks and the 10-year Treasury yield were indeed Positively correlated. Both are mounted.
Because, as I said before in those same issues, the negative correlation between returns and growth stocks was never going to last – that’s a temporary phenomenon.
Historically, there is no significant correlation between the two. In fact, in the last rate hike cycle from 2016 to 2019, when yields rose, growth stocks outperformed – but only after temporarily underperforming in 2016.
Under the hood, what happens is that – since we’re in a decades-long bull bond market where yields have been trending down since 1980 – whenever we enter a period of rising yields or falling yields. rising rates due to escalating inflation, investors panic. that means the end of the âlonger lowâ in yields, and they are selling yield-sensitive growth stocks.
But they are never right.
As things unfold, the age-old deflationary forces of technology and globalization – digital technology platforms like Amazon, Netflix and Facebook make everything faster, cheaper and more convenient, while outsourcing of labor around the world reduces production costs – overwhelming everyone with inflationary pressures, whether they are demand-driven or supply-driven (as is the case today).
The Fed is increasing several times. Then stop. Yields are stabilizing. And they never get out of their 40-year downtrend. They stay lower for longer.
Soâ¦ what are investors doing? They flock to growth stocks, and after a temporary “difficult period”, these stocks ascend.
The last time this happened was in 2016-17.
In 2016, the Vanguard Growth Index Fund ETF (VUG) rose only 6% amid rising yields, inflation and concerns about rising rates. In 2017, as those fears faded, exchange-traded funds (ETFs) rose nearly 30%.
It should be noted that the more the title is focused on growth and at an early stage, the greater the rebound. Cathie Wood’s Startup Growth Fund – ARK Innovation ETF (ARKK) – fell 2% in 2016. It increased by around 90% in 2017.
I believe we are at the start of a similar turnaround. That is, 2021 looks a lot like 2016, and I think 2022 could look a lot like 2017, which implies a big break in growth stocks next year – and a huge break in growth stocks at. an early stage.
The last time this happened, early stage growth stocks practically doubled in a year. Could the same thing happen this time around? I think so.
Are you interested in doubling your money in 2022?
I thought so. And that is why I would like to introduce you to our flagship investment research product, Innovative investor, which focuses on investing in very early stage growth stocks that are expected to skyrocket next year.
More than that, we invest in the best of the best in the early stage of growth world – disruptive technology companies that have game-changing technologies, are led by world-class teams, and have the potential to reshape our professional and personal lives over the next several years.
It’s not just stocks that could double next year. These are stocks that could skyrocket 5Xâ¦ 7Xâ¦ even 10X or more in the long run.
Does this sound like the type of stocks you want to invest in?
Good. Then, if you’re ready to get rich over the next four or five years, let me walk you through how to capitalize on the greatest wealth-creating force the world has ever known …