Do We Have a "Good" Low or Is This a Setup?

Follow @MrTopStep on Twitter and please share if you find our work valuable.

Our View

I think it’s fair to say that we don’t know if the 4350 low is a good low or just another short-covering trap for another smash lower. I can't speak for you, but to me everything seems so frayed.

What I do know is that higher yields are affecting people's buying power. Last week Americans poured $36 billion into money-market funds in the latest week, taking advantage of yields that have soared past 5%.

According to Refinitiv Lipper data, through Aug. 16th it was the largest weekly inflow since May. The yield on the 10-year Treasury note settled Friday at 4.251%, near its highest level since 2007.

I’ve always said I’m not an economist, but Parker Schwartz told me that if the 10-year yield approaches 5%, it is the bond market’s way of saying that the Fed won't cut rates for an extended period of time. There is definitely a mindset that a large part of investors would rather make 5% on their money over it being put to work in the 'risky' stock market.

Do I agree with that?

The answer is yes and no.

The yes being if you are not overly invested in the stock market and no if it means liquidating your mutual fund or retirement account. But…I also would not say “no” to taking some of the mutual fund money and locking in 5% either.