Positioning For A Forth Quarter Rebound

Stocks and bonds rallied after the Fed’s rate hike, with the 10-year Treasury yield retreating below 5% and oil prices easing inflation concerns. Continued improvement in oil and interest rates would provide a strong tailwind for Q3 earnings and potentially drive new all-time highs in major indexes. Market breadth remains weak, with only 31% of S&P 500 constituents above their 50-day moving averages, signaling caution until this metric turns up. Interest rate sensitive sectors — real estate, utilities, and consumer discretionary — are poised to outperform in Q4 if oil and rates have indeed peaked.

In a delayed reaction, stocks and bonds rallied after the Fed raised its benchmark rate by a quarter point. The major market indexes posted their strongest one-day gains in more than six weeks, and the 10-year Treasury yield fell back below 5% to settle.