Rosalind Evans
Currently, US Treasury rates are surging. This spells trouble for the stock market and potential homebuyers.
Recently, the US 30-year Treasury bond yield soared to its peak since 2011, while the 10-year note saw its best performance since October 2022. When bond prices dip, yields rise.
Driving Factors: The Federal Reserve has increased interest rates by over 5 percentage points in the last 18 months to combat rampant inflation.
Until recently, many on Wall Street believed that the Federal Reserve’s rate hikes were nearing an end — with some predicting potential economic downturns for the US.
However, robust economic indicators have caused a rethink. The US has shown economic robustness with the Atlanta Fed forecasting an impressive 5.8% annualized GDP growth rate for the third quarter. Additionally, unemployment rates remain low, and consumer expenditure is solid.
There are concerns among Federal Reserve officials about persistent inflation. Their July assembly suggested that further interest rate hikes might be on the horizon, as indicated by recently published minutes from the meeting.
Implications: Rising bond yields can unsettle the stock market. As bonds and stocks compete for investment, higher yields can make bonds more enticing, primarily because they’re backed by the government, unlike riskier stocks. Tech stocks, in particular, may be more susceptible due to their frequent reliance on debt for expansion.
Furthermore, a stronger US dollar, which is often a result of higher yields, can adversely affect stocks. Adam Turnquist of LPL Financial explains that a potent dollar can diminish the value of international earnings for companies and make US exports pricier, affecting corporate profitability.
For the everyday American, a surge in the 10-year Treasury yield means pricier car loans, credit card interest rates, student loans, and mortgages. Current US mortgage rates are the highest they’ve been in 21 years, making homes less affordable than they’ve been in many years.
International Impact: However, the solution isn’t solely in the hands of the US. Both the EU and the UK grapple with inflation, and their respective central banks might continue raising interest rates. An increase in international bond yields can reduce demand for US bonds, prompting the US to offer even more enticing yields to lure investors.
Regardless, Turnquist believes the key to tempering Treasury yields is a more moderate-paced US economy.
Hawaiian Electric Faces Stock Drop Amid Lawsuits
Hawaiian Electric Industries (HE) saw its stock plummet by over 15% on the recent news that Hawaii’s leading power supplier might be considering restructuring due to numerous expensive lawsuits connected to Maui’s severe wildfires.
The stock has dipped by over 71% this year alone.
Accusations state that Hawaiian Electric did not turn off their power lines during high-risk conditions, which potentially led to the Lahaina Fire. The fires resulted in the tragic loss of at least 111 lives in Maui.
The Wall Street Journal recently reported the utility’s potential restructuring discussions, hinting at bankruptcy as a possible resolution. This news followed a downgrade of Hawaiian Electric and its subsidiaries by S&P Global to a BB- status, typically viewed as “junk”.
When approached by CNN, a company representative refrained from commenting on ongoing lawsuits or stock prices but did later state their intent to remain a financially resilient utility for Hawaii.
Taylor Swift’s ‘Eras’ Tour Set to Shatter Records
Taylor Swift’s “Eras” tour might make history with an estimated $2.2 billion in North American ticket sales, based on data from QuestionPro. This staggering sum includes sales from recent shows and an upcoming North American tour next year.
With an average ticket price of $455.78 and 68 North American shows, the tour could set a new benchmark. The average attendance stood at 72,459 per show.
If projections hold, Swift’s “Eras” will surpass Elton John’s “Farewell Yellow Brick Road” tour, which held the previous record at over $887 million from 2018-2023.
In a rapidly evolving economic and entertainment landscape, understanding the ripple effects of treasury yields and the power of star-studded tours offers a comprehensive glimpse into the nation’s financial pulse. From the challenges faced by energy giants like Hawaiian Electric to the dazzling success of icons like Taylor Swift, the current scenario underscores the multifaceted nature of the American market. As we navigate these unprecedented times, staying informed is our best tool for making sound decisions and appreciating the vast tapestry of events shaping our world.
