It was November 1996 when the S&P last traded at 750, today’s close.
Thirty year Treasury bond yields fell to 3.56%. Governments advanced at an historic rate, up 5%+. After the close they rose another 2%! Never before in history have bonds yielded so little. No one seems to care about the low rate of interest they just want someplace to put their money and get the principle back. Fear is rampant.
To some, Japan of the ’90’s looks more and more like our future. Zero rates, no growth, no pricing power. Assets erode.
Citi’s stock traded more than 700 million shares and fell another 26%. Fear of default and/or a weak merger.
The VIX is a traded option which, in many ways, mirrors the fear of portfolio managers. Buying portfolio protection is reflected in the VIX. Its price reflects just how fearful managers are. the more fear the more they are willing to pay. It began this year at 22 and finished today at 81, up almost 8% and an all time high. Again, fear.
Those that missed the rally from 1996 to 2007 and have cash will have a difficult time not putting a little to work.
I am tempted to say we could have a significant snap-back rally. Lets watch together.
