Having worked as an equity strategist for well over a decade, I’ve lost count of the number of times I’ve had the debate on ‘what happens to equities when bond yields go up?’. And for most of that time bond yields were in the ice age and falling! To cut down on some future deja-vu, here's my Top 7 list of things to consider about equities when bond yields go up.
Remember the EU referendum? The City thought the British public would see the economic benefits of EU membership and not wish to loosen ties with our closest trading partners. Turns out the City was wrong and had misread the mood of the nation. The current discussion around nationalisation has some worrying similarities, so is the City making the same mistake again?
In a raging bull market there is always the temptation to buy the laggards in the hope of juicy returns from a 'catch-up' trade. Unfortunately, all too often you end up in a value trap instead: there’s a reason the stock has lagged and that reason often turns out to be annoyingly persistent. There’s no doubt that Mexico meets the laggard definition. But I would argue that there’s a strong case it could actually be a catch-up story.