The first serious market sell-off in some time has reminded investors that a higher-for-longer rates environment is still very possible.
, falling 1.4 per cent. The tech-heavy Nasdaq index, which has seemingly been unstoppable for much of this year, fell 2.2 per cent.
The second factor to push yields higher was news from the US Treasury Department, which said it plans to sell $US103 billion of long-term debt next week, which was up from its previous estimate of $US96 billion and more than most analysts had expected.
Indeed, there are plenty of strategists that suggest a pullback in equities during the typically quieter month of August . Thomas Lee, chief investment officer at Fundstrat, has picked this year’s rally perfectly, and is one who has warned that a pullback is possible, before the market starts climbing again.
Lee makes an excellent point. While markets have been moving higher all year, this is not a rally that has full buy-in from professional investors, who have continued to keep cash allocations high. They may well see any pullback in stocks over the next few months as a chance to get into a market they’ve been begrudgingly chasing for much of the year and so as Lee points out, it may be that a dip of any size is well bought.
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