The Yamamoto Forecast
P.O. Box 573, Kahului, Hawaii 96733
(Tel) (808) 877-2690
July 11 ~ Time is running out for the bond market. As the months pass, the effects of multiple interest-rate reductions and the biggest tax cut in history will become apparent. An economic recovery is going to materialize. A confirmation of improving business conditions will be seen. And that's bad news for bonds.
To be sure, for the current quarter and perhaps the next one, doubts of a pickup in demand could develop. This cloudy picture might trigger intermittent rallies, but don't be fooled. It's nothing more than a sucker's rally -- a short-lived affair. Time is definitely working against the debt market.
Am I talking about a boom in the business cycle? No, not anytime soon. Yet by the fourth quarter, indications of a turnaround should be spotted. By mid-2002, the U.S. economy will likely be on solid footing -- so much so that the focus of the bond traders will shift from lower interest rates to higher rates. If that's the scenario, you don't want to own bonds.
The recovery may take awhile. Then again, I must remind you that the market anticipates events. Any hint or a slight sign of a business rebound spells trouble for the debt market. A change in the landscape is not required, just the promise of one.
-- Irwin T. Yamamoto |
