“In normal rotation from bull to bear, you’d go straight into government bonds, but this is the problem. With interest rates going up, because the economy is strong and inflation is picking up, government bonds have become not the safest asset class in the planet but toxic waste,” he said.
“So, by relative comparison, you’re sort of trapped into equities even though you know they are not good value,” he added.
Last week, the yield on the 10-year soared over 2.88 percent, clinching a 4-year high and sparking a week of equity turmoil. With stronger-than-expected wages numbers in the Labor Department’s recent jobs report, investors have been worried that rising inflation could undermine the value of debt’s fixed payments.
But equity traders headed for the exits as yields rose, pivoting to safe havens like Treasurys as the Dow Jones industrial average hemorrhaged value, spurring bond purchasing and sending yields off their highs.