Did you know that during the 18th century, the South Sea Bubble became one of the most famous market crashes?

This historical event underlines the risks of speculative investment, reminding us of the value of informed decision-making.

In this edition of Equity Eats, we focus on:

• Skewed Reality Is Not A Smart Approach To Investing: First, we’ll highlight the need for objectivity in reacting to financial news, with a look at recent inflation reports 🙃

• Dividend Stocks Made A Comeback In March, Treasury Yields Dictate The Next Move: Next we’ll discuss the resurgence of dividend stocks and implications of stable Treasury yields 📊

• Still Bullish: Finally, we’ll analyze the potential for growth in the stock market, driven by technological innovations in the U.S. 🐂

Stay informed and ahead with insights from our latest analyses of current market dynamics.

Skewed Reality Is Not A Smart Approach To Investing 🙃

The first rule of investing is to be objective.

For most human beings, that doesn’t come naturally, and most of us don’t even know our biases.

A case in point was a recent headline put out by Barrons, the top financial news magazine in the U.S., which read “Inflation Progress Stalls, Fed’s preferred Gauge Shows” 😱

While that may be true, it was not the real story.

If one were to listen to this headline, the conclusion would be to worry and probably unload some of your stocks.

But that would probably be the wrong decision ❌

Fed Chair captured the real story behind the data.

Powell’s first thought when he saw the last PCE inflation report for February was that the data were “pretty much in-line with our expectations” 🎯

Core PCE, which excludes food and energy prices, was up 2.8% on a 12-month basis.

Headline inflation was 2.5% year-over-year.

“That's what we were expecting and it's good to see something coming in, in line with expectations.”

Dividend Stocks Made A Comeback In March, Treasury Yields Dictate The Next Move 📊

Sturdy dividend-paying stocks became a popular trade in March as bond yields stayed largely stable.

The SPDR S&P Dividend SDY exchange traded fund rose 4.4% in March, its best monthly performance since December 📈

Since mid-2022, their dividend payments have seemed less attractive overall compared with government bonds.

Dividend ETFs’ rally in March was a result of the 10-year Treasury yield staying largely stable.

It ended the month of March at 4.192%, just a few basis points away from 4.251% at the start of the month.

Dividend stocks have been deeply out of favor since the October 2022 lows in the stock market.

The risk for dividend payers is if investors have to pare back their projections for Fed rate cuts because of higher-than-expected inflation readings or new Fed commentary, the 10-year yield could rise much more than a few points over a month, even if the Fed still cuts rates later this year.

Investors should keep an eye on the 10-year yield hitting 4.352%, this year’s intraday high set on February 22 👀

These are what’s called resistance levels, or points from which the yield has struggled to rise recently.

If the 10-year consistently goes above that level, it could break through further.

And in that case, dividend ETFs’ strong run could reverse once again.

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Still Bullish 🐂

The S&P has risen dramatically, powered by America’s leading tech companies.

Yes, this could be another bubble—and there are countless things to be worried about, including the potential for aggressive and unfortunate regulation at a time when AI-related competition is just kicking in.

That said, markets climb a wall of worry.

America’s innovation in AI, growing creativity, and momentum in defense (focused on deterrence) combined with our democratic, entrepreneurial, and capitalist system is likely to surprise us on the upside 🥳

Inner Circle Macro Update 🔍

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