Interest Rates Are Front & Center

After yesterday’s action I would have thought there would be a pause or mild pullback today. Pre-market trading shows a jump up at the open based on yet more strong earnings and oil trading lower. It’s amazing how the negative the narrative continues to be regarding the economy and earnings. I laugh when people say that the economy is really weak but earnings are really good. Just think about that for a minute.

We continue to see all-time highs in the S&P 500, NASDAQ 100 with the Russell 2000 joining the party. I expect the S&P 400 and Dow Industrials to also party shortly. However, with a melt up like we have seen, a mild pullback at any time should occur. Until proven otherwise, it is buyable.

One thing that is making the news today is bond yields. Recall that my 2026 forecast had long-term rates going up while short-term rates going down, a rare condition in the markets. Below is the benchmark yield on the 10-Year Note. FYI, the 30-year mortgage is loosely tied to this.

Rates have been rangebound between roughly 4% and almost 5% if I am rounding.

Taking a longer-term view, you can see the range much more clearly. This three-year range bound by the light blue lines is going to lead to a large move in rates, up or down. Investors always want rates to go up or down for the right reasons, like stronger growth and lower inflation, definitely not the opposite.

Finally, someone asked about gold which I had written about a few weeks as a potential trade setting up. It did set up. We did execute. And the model sold one day later because conditions changed. The same set up is here again, but we have not executed yet.

On Friday we bought EMB, BMAY, more, FDN, more IYR, more XLE, more XLC, more XBI, more PTH and more XLB. We sold some MQQQ, some QLD and some JNK. On Monday we bought RYTNX, more QLD, more RMQHX, more IYR, more PTH, more XLP, more XLE, more FDN and more XLB.