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Sensitivity to bond yields shows the stock market is fragile

Investors in shares are fretting about rising bond yields
February 26, 2021

World equity markets continue to fret about the rise in government bond yields. The fact that ten-year Treasuries in the US have a redemption yield of just 1.4 per cent and the UK equivalent is 0.8 per cent, shows how fragile the market is.

This is continuing to hurt the share prices of expensively valued growth stocks whilst growing belief in the Covid-recovery trade is fuelling a surge in UK domestic and cyclical shares. This is causing both my fantasy portfolios to underperform badly given my exposure to the former and lack of exposure to the latter.

However, I am not going to change my approach of favouring resilient, high-quality businesses that I think can grow steadily over the long-term. Investing is not easy and the main reason I set up the fantasy portfolios is to show this.

If you are investing with a portfolio of individual shares you have to accept that it will not perform well in all weathers. At the moment we are seeing a powerful rotation into cheaper so called value stocks which could have some way to run.

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