Don't invest in the stock market and invest in the bond market instead? US household holdings of US Treasury bonds reach a 25-year high.
Since the Federal Reserve began raising interest rates last year, American households have been heavily involved in the $25 trillion US Treasury market.
According to Dolphin Research, since the Federal Reserve began raising interest rates last year, American households have been heavily involved in the $25 trillion US Treasury market.
According to data from Torsten Slok, Chief Economist at Apollo Global Management, their holdings have surged from less than $1 trillion when the Fed started raising rates in 2022 to about $2.5 trillion, reaching the highest level in the past 25 years.
Slok wrote in a Friday email commentary, "Most importantly, US households find the current US bond yields attractive."
The recent sharp rise in the 10-year US bond yield to nearly 4.5%, the highest level since the end of 2007, has become a focus on Wall Street. Large-cap tech stocks and other interest rate-sensitive sectors in the market have been heavily sold off after the Fed hinted that it may keep policy rates at higher levels for a longer period than expected.
Although the slight retreat in the 10-year US bond yield on Friday provided some support for the US economy, the stock market still suffered significant losses this week.
As of Friday, the consumer non-essential sector of the S&P 500 index fell 5%. This may indicate that investors believe companies focused on luxury goods, such as automobiles, furniture, vacations, and other non-essential items, may be affected by an economic downturn.
Tesla (TSLA.US) stock fell more than 7% this week, while Amazon (AMZN.US) fell about 6.7%. Other stocks in the "Big Seven" that have performed well this year have also been falling since Monday.
The higher borrowing costs not only put pressure on consumers but also threaten large companies with a large amount of debt maturing in the coming years. Securities in the portfolio that are older and have lower yields now appear to be less valuable.
Due to the rise in yields, some of the bond market's returns have been wiped out. According to FactSet data, as of Friday, the benchmark Bloomberg US Aggregate Index has a return of -0.6% this year and a return of -14.4% over three years. The iShares US Aggregate Bond ETF (AGG.US) has fallen 2.1% year-to-date.