ETFdb Logo
  • ETF Database
  • Channels
    • Themes
      • Active ETF
      • Alternatives Channel
      • Artificial Intelligence
      • China Insights
      • Climate Insights
      • Core Strategies
      • Crypto
      • Disruptive Technology
      • Energy Infrastructure
      • ETF Building Blocks
      • ETF Education
      • ETF Investing
      • ETF Strategist
      • Faith-Based Investing
      • Financial Literacy
      • Fixed Income
      • Free Cash Flow
      • Innovative ETFs
      • Invest Beyond Cash
      • Leveraged & Inverse
      • Modern Alpha
      • Portfolio Strategies
      • Tax Efficient Income
    • Asset Class
      • Equity
        • U.S. Equity
        • Int'l Developed
        • Emerging Market Equities
      • Alternatives
        • Gold/Silver/Critical Materials
        • Crypytocurrency
        • Currency
        • Volatility
      • Fixed Income
        • Investment Grade Corporates
        • US Treasuries & TIPS
        • High Yield Corporates
        • Int'l Fixed Income
    • ETF Ecosystem
    • ETFs in Canada
    • Market Outlook
    • Crypto ETF Hub
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Database Categories
    • Indexes
    • Scenario Analysis
    • Watchlists
    • Head-To-Head ETF Comparison Tool
    • Mutual Fund To ETF Converter
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
  • Research
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF of the Week Podcast
    • Gaining Perspective Podcast
    • ETF Prime Podcast
    • Video
  • Company
    • About VettaFi
    • Get VettaFi’ed
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. ETF Strategist Channel
  2. 2 Signs of Stock Market Strength, Courtesy of the Bond Market
ETF Strategist Channel
Share

2 Signs of Stock Market Strength, Courtesy of the Bond Market

Horizon Investments   Sep 27, 2023
2023-09-27

Falling interest rate volatility in Treasuries could herald a stock market rally.

There are few things that make investors happier than having clarity about where the markets are today and where they’re likely headed. And thanks to some recent bond market trends, investors may have reason to feel pretty happy.

Here’s why: In what is potentially a very big deal, the daily volatility of the 2-year U.S. Treasury note’s yield has plummeted by 9 basis points—from a high of 15 basis points during the banking crisis earlier this year to just under 6 basis points today, as seen in the chart.

2 Signs of Stock Market Strength, Courtesy of the Bond Market
Source: Bloomberg, calculations by Horizon Investments, 60-day realized volatility. As of 09/19/23

As we’ve pointed out, falling interest rate volatility can set the stage for risk assets such as equities to rally because lower levels of rate volatility can give investors greater confidence in stock valuations. The recent slide over the past few months means the 2-year Treasury’s volatility level has fallen back to where it was in March 2022 (when the Fed began its aggressive campaign of inflation-fighting interest rate hikes) and is now much closer to its long-term average of 5.5 basis points per day.*

Another encouraging bond market sign: The MOVE index—which essentially measures expected future rate volatility among Treasuries—recently dipped below 100 (which implies a move of approximately 6 basis points per day) for the first time since February and is inching closer to its historical average of 89.

None of this means a stock market rally is a sure thing, of course, and other factors (such as oil prices continuing to rise) could put a damper on equity prices. But if realized and expected bond market volatility stay on their current paths lower, stock investors may finish strong in the final months of 2023.

*measured from January 1990

For more news, information, and analysis, visit the ETF Strategist Channel.


Content continues below advertisement

This commentary is written by Horizon Investments’ asset management team.

Past performance is not indicative of future results.

Nothing contained herein should be construed as an offer to sell or the solicitation of an offer to buy any security. This report does not attempt to examine all the facts and circumstances that may be relevant to any company, industry, or security mentioned herein. We are not soliciting any action based on this document. It is for the general information of clients of Horizon Investments, LLC (“Horizon”). This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any analysis, advice, or recommendation in this document, clients should consider whether the security in question is suitable for their particular circumstances and, if necessary, seek professional advice. Investors may realize losses on any investments.

The MOVE index, or Merrill Lynch Option Volatility Estimate Index, is a crucial gauge of interest rate volatility in the U.S. Treasury market. Reference to an index does not imply that any account will achieve returns, volatility, or other results similar to that index. An index’s composition may not reflect how a portfolio is constructed in relation to expected or achieved returns, portfolio guidelines, restrictions, sectors, correlations, concentrations, volatility or tracking error targets, all of which are subject to change. Individuals cannot invest directly in any index. Indices are unmanaged and do not have fees or expense charges, which would lower returns.

The investments recommended by Horizon Investments are not guaranteed. There can be economic times when all investments are unfavorable and depreciate in value. Clients may lose money.

Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. All investing involves risk of loss, and in periods of market growth, risk mitigation strategies can be expected to lag in performance behind equity strategies that do not focus on risk mitigation.

This commentary is based on public information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed herein are our opinions as of the date of this document. These opinions may not be reflected in all of our strategies. We do not intend to and will not endeavor to update the information discussed in this document. No part of this document may be (i) copied, photocopied, or duplicated in any form by any means or (ii) redistributed without Horizon’s prior written consent. Forward-looking statements cannot be guaranteed.

Other disclosure information is available at www.horizoninvestments.com.

Horizon Investments and the Horizon H are registered trademarks of Horizon Investments, LLC

©2023 Horizon Investments LLC

Loading Articles...
Our Sites
  • VettaFi
  • Advisor Perspectives
  • ETF Trends
Tools
  • ETF Screener
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Database Pro
More Tools
  • Financial Advisor & RIA Center
Explore ETFs
  • ETF News
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Information
  • Contact Us
  • Terms of Use and Privacy Policy
  • © 2025 VettaFi LLC. All rights reserved.

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X