On Thursday. the S&P 500 was up just 0.1%. I did officially poke it’s nose over the 5000 level for the first time before closing at 4998.
Toronto was down 0.2%.
Shopify was up 3.1% after reports that it may raise some of its subscription prices.
lululemon was up 3.3%.
TFI International reported lower earnings acter the close but projects growth ahead and increased its modest dividend by 14%.
Interest rates on the bond markets moved higher today. The reported yield on the 5 year Government of Canada bond rose to 3.68%. After a steep decline this past Fall from highs around 4.5% it bottomed at about 3.1% in late December but is up quite significantly since then.
Similarly, the U.S. ten year treasury bond closed at 4.15% today after starting the year at 3.95%.
All else equal, higher interest rates push down the values of almost all stocks and bonds and preferred shares. One exception would be any rate reset preferred shares that are close to a reset date. For example CWB.PR.B that will reset at the end of April.
Stocks and preferred shares had been mostly increasing since the start of this year despite the interest rate increases. That may have been driven by confidence that these rates would soon turn around and go lower. The expected timing for that has now been pushed to somewhat later this year than was earlier hoped but stocks including preferred shares have not been negatively impacted it seems.
If the market starts to turn more attention to various risks, it will tend to push the value of most investments down. Exceptions could include government bonds. Having some cash and near-cash in a portfolio is never a bad idea as ONLY cash (and cash equivalents) can be counted on not to decline when fear mounts.
Having recent read Nassim Taleb’s The Black Swan (a tough read) I think his main message was that markets are always risky and unpredictable. The trick is to be positioned such that when an unforeseen slump occurs, you will not be decimated or too badly hurt by it. Holding cash could certainly be part of such an approach.