• Comments for February 21, 2023

    Only a small comment today after a three days holidays.

    We can see below that with the recent surge in the 10Y rates, the equities markets have become overvalued.



    At the current 10Y rates of 3.86%, the overvaluation level (Pink arrow) is about $3830, which is the most recent support level on the $SPX.

    The Blue arrow tells us that the 10Y rates should need to fall back down to 3.6% in order to resolve the overvaluation of the equities markets.






    As can be seen below, investors are not buying the 10Y Treasuries here, indicating that they do not expect the rates to fall back down. Hence, mechanically, equities should revert BELOW their overvaluation level.



    Interesting to see that investors are indecisive on the S&P500 Futures.



    Conclusions:

    Markets should move down, except if the FOMC meeting minutes indicate a dovish Fed consensus.