Catalyst to Get Investors Back Into Equities?
Have U.S Treasurys risen to such engorged levels that they may burst? Some believe this may happen, which would cause investors to quickly dump government bonds. But others believe this could also be a good time to get back into equities.
"Bonds currently have all the hallmarks of a bubble," Chris Hyzy, chief investment officer at U.S. Trust, Bank of America Private Wealth told CNBC's "The Strategy Session" on Monday.
"Overall when you look at this transformation of money, there is an over allotment of money in fixed income—$600 billion in positive flows in the fixed income funds since early '08, negative $240 billion into equities," Hyzy said.
There are many factors "forcing yields lower and forcing people back to the risk aversion camp"—when an investor is faced with two investments with a similar expected return (but different risks), they will prefer the one with the lower risk, he said.
But "stocks are dramatically cheap, you're talking five or six decades cheap in terms of their value," he said, adding, "now we need a catalyst,"—more jobs.
Hyzy believes that jobs will come back by the end of the year, which will send a message for consumers to start spending again. This in return may trigger investors back to risky assets, causing equities to outperform.
Related Bond Market Links:
- Crescenzi: Bond Market Babble
- Bond Bubble Fear Returns as Investors Flee Stocks
- CNBC's: The Bond Market