Rising real yields are threatening perennial `TINA’ trade favoring U.S. stocks — and put tech names further at risk
Rising inflation-adjusted yields in the U.S. are undermining the long-running trade in which investors favor stocks over other asset classes, and are poised to hit the technology sector even harder.That trade — known as “TINA,” an acronym for “There Is No Alternative” to equities — is being increasingly tested by real yields, which have risen from below zero on expectations of aggressively higher interest rates by the Federal Reserve.
Read: A rough 4 months for stocks: S&P 500 books worst start to a year since 1942. Here’s what pros say you should do now. The chart below shows how much inflation-adjusted stock valuations had already plunged before 2022, according to Morgan Stanley Wealth Management, which manages $4.8 trillion. Though Treasury yields have soared and inflation is running at a 40-year high, the price/earnings ratio on the S&P 500 and Nasdaq Composite have barely budged, the firm said.
A model produced by Quant Insight, which uses artificial intelligence and machine learning to analyze more than 6,000 securities across asset classes, showed that “macro conditions are getting worse for equities relative to bonds” — a turnabout since March, according to Huw Roberts, the firm’s London-based head of analytics. “The consolation is that, to some degree, SPY SPY has already priced in some of the bad news,” Roberts wrote in an email.
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