‘Bellwether bond’ down over COVID-variant concerns, ‘sending strong signal,’ says local analyst

Nov 26, 2021, 1:59 PM | Updated: Nov 29, 2021, 11:16 am
COVID variant...
(Photo by Spencer Platt/Getty Images)
(Photo by Spencer Platt/Getty Images)

Wall Street saw its biggest losses of the year Friday after investors reacted to news of a new COVID “variant of concern,” which the World Health Organization has named the “omicron” variant. The Dow Jones Industrial Average lost 905 points, or more than 2.5% of its value.

While many investors pay attention to the Dow, analyst Mike Alfstad of Seattle’s Alfstad Capital says he watches another benchmark, which has him concerned.

“As a bond guy, I watch the 10-Year Treasury yield, which is the bellwether bond around which everything else rotates, and upon which we rely a lot,” Alfstad told KIRO Radio. “When I see that indicator down over 10% in one day, that is really sending a strong signal.”

He says it’s an indication some investors fear another slowdown in the economy.

“But there’s a caveat,” he continued. “The trading desks are thinly populated on the day after Thanksgiving, so we can’t take too much away from a day like today.”

Alfstad says Monday will be an important day for investors.

“What the markets do after a day with big losses is either a validator, or it’s a discounter,” he said.

He told KIRO Radio that he would not be surprised to see Monday “validate” the Friday trading losses, which could send the markets into a deeper decline.

He thinks people with money in bonds and stocks need to pay close attention to their investments.

“My advice to everybody would be: In times of turmoil such as this, execute a modicum of caution, a bit more than normal,” he said. “Be prepared, not overwhelmed, if we slip back into a difficult economic moment for a while.”

Alfstad says he encourages people to put money into savings and have as little personal debt as possible.

He says it appears the market is fearful of a new surge of COVID-19 with the omicron variant, and a further cooling of the world economy with supply chain disruptions and travel restrictions.

“But we, as a nation, are capable of coming together and doing extraordinary things together if we believe in one another. So that would be my advice,” Alfstad said. “Let’s believe in one another.”

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‘Bellwether bond’ down over COVID-variant concerns, ‘sending strong signal,’ says local analyst