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September 01, 2020 1:32pm
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Seven reasons to fade the growth scare

It is astonishing to see the market narrative shift in the space of only a few months from "inflation is coming" to a growth scare. In late March, the 10-year Treasury yield topped at over 1.7% and the 2s10s yield curve was steepening. Today, the 10-year has decisively broken support and the yield curve is flattening, indicating fears of slowing economic growth.

In late May, I forecasted bond market price strength and called for a counter-trend rally in growth stocks (see What a bond market rally could mean for your investments) but the latest move in both yields and growth appear exhaustive. As evidence of the change in psychology, Bloomberg reported that put option premiums over calls on the 10-Year Treasury Note have vanished. Traders are now paying more for call options than put options.

Here are seven reasons why investors should fade the growth scare.
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