Steve Wieting, Citi Global Wealth chief investment strategist, joins ‘The Exchange’ to discuss stocks vs. bonds, the state of the economy, and more….(read more)

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Global yields are ‘terrible competition’ for stocks, says Citi’s Steven Wieting

In the current economic landscape, global yields are posing a significant challenge to the performance of stocks, according to Steven Wieting, the Chief Investment Strategist at Citigroup. Wieting’s comments come amidst a period of heightened volatility in financial markets, as investors grapple with the impact of rising interest rates and inflationary pressures.

In a recent interview, Wieting stated that the low returns on fixed income and other interest-bearing investments are providing “terrible competition” for equity markets. With central banks around the world starting to raise interest rates in response to surging inflation, the yield on government bonds and other fixed-income securities has been increasing. This has put pressure on stocks, as investors weigh the relative attractiveness of different asset classes.

The recent bout of volatility in financial markets has highlighted the delicate balance between bond and equity investments. Historically, bonds have been seen as a safe haven during periods of market turbulence, offering steady returns and a degree of capital preservation. However, with yields on government bonds increasing, investors may be tempted to shift their funds away from equities and into fixed-income securities.

Wieting’s comments underscore the broader concern among market participants about the impact of rising interest rates on equity valuations. As central banks tighten monetary policy to combat inflation, the cost of borrowing and the discount rate applied to future cash flows are expected to rise. This makes it more challenging for stocks to justify their current valuations, particularly in sectors with high growth expectations.

The recent spike in Treasury yields and other government bond yields has further exacerbated the competition between fixed income and equities. Yields on 10-year US Treasury notes, for example, have risen sharply in recent months, reaching multi-year highs. This has prompted concerns about the potential for a rotation out of stocks and into bonds, as investors seek to lock in higher returns and reduce their exposure to market risk.

In response to these developments, Wieting has stressed the importance of maintaining a diversified portfolio that includes a mix of both equities and fixed income. While stocks may face challenges in the short term due to rising yields, Wieting emphasizes the enduring appeal of equities as a long-term investment. He also notes that the relative attractiveness of different asset classes will continue to evolve as market conditions change.

As investors navigate an uncertain and rapidly changing investment landscape, the comments from Citi’s Steven Wieting underscore the importance of carefully considering the implications of global yields on stock performance. With bond yields posing significant competition for equities, investors will need to carefully assess their risk tolerance and investment objectives in order to construct a balanced and resilient portfolio.