The market has been pretty unpredictable recently but if we are to take a look at bond yields, it can help us investors know what might happen in the market. The treasury note has decreased from 1.9% to 0.7% year to date. This could be why the markets have done well recently too. Stock price estimates are formed from formulas containing yields, and with lower yields it can help pull down discount rates. This can make future earnings more valuable, although if the future is very uncertain it can offset the positive impact of lower yields. A big consequence of the drop-in yield is the weakening of the USD. Investors tend to favor currencies that are offering a better risk-free rate, so if the USD continues to decline investors might find themselves investing in other currencies again weakening the USD more.

A second round of $1,200 stimulus checks to help the U.S weather the pandemic seemed likely while both Democrats and Republicans supported the proposal in early in July. Many Americans were confident that congress would approve a new round of federal jobless aid, but with bipartisan talks now stalled, a second direct check is one of several proposals that can’t seem to make any ground do to political disagreements. After Democrats blocked a Republican proposal on Thursday, lawmakers in both parties are increasingly pessimistic that Congress can reach an agreement before the November election. No deal would mean no check and no enhanced unemployment benefits from Congress. I personally do not think be a round two stimulus. There will be too many disagreements among the parties right now due to the tension of the election.

Written by: Mike Koniar, Domestic Analyst | Eric Bartos, Domestic Director