Rise in US bond yields not yet a threat to equity markets

  • Timothy Hayes, investment strategist at Ned Davies Research, sees ongoing bull market in equities still intact
  • Liquidity and sentiment as key drivers
Vienna/ March 19, 2021. Rising U.S. government bond yields recently caused turbulence in the markets. For Timothy Hayes, Chief Global Investment Strategist at Ned Davies Research, the bull market is nevertheless intact. He digitally presented his market outlook for 2021 at the invitation of Kathrein Privatbank to the annual Private Banker's Lunch for institutional investors on March 17. Key indicators support his optimistic outlook. First and foremost, high liquidity is responsible for the positive development of the stock market. Hayes also does not expect the Fed to change course, which is why there is no end in sight to this trend in the USA. Investor sentiment should therefore remain positive. Asked how long such positive sentiment could last, he said, "Longer than you might expect."

Recovery on a broad front

For Hayes, the corona-induced collapse of the markets exactly one year ago was only an outlier in a secular (i.e. long-term) bull market that has remained intact since the end of the financial crisis in 2009. At 12 years, this market has reached a certain stage of maturity, but other comparable bull markets have lasted more than 18 or even more than 20 years. The recovery in corporate earnings, with more than 70% of companies in the MSCI World Index beating analysts' forecasts in the last reporting season, gives him confidence. Likewise, that the recovery of the stock markets has been carried by the broad market and not only by the already highly valued FANMAG companies.


So who will benefit from the expected environment? According to Hayes, China and thus the emerging markets have a good chance to outperform as commodity prices rise. The financial sector could benefit from rising yields. Small (value) companies (small caps) are also likely to be among the winners. Gold is suffering from the rise in yields, which is why it tends to have a neutral weighting in the portfolio here. Kathrein Privatbank is the only bank in Europe to manage a fund in cooperation with Ned Davies Research (NDR), one of the most recognized investment research institutes in New York: the NDR Active Allocation Fund.


Kathrein Privatbank AG, headquartered in Vienna, was founded in 1924 by Carl Kathrein and is one of the leading private banks in the German-speaking region. Our core competence lies in the management of private, corporate and institutional assets as well as the assets of private foundations. As a subsidiary of Raiffeisen Bank International AG, Privatbank offers the advantages of a flexible, independent and service-oriented institution and the security of a stable, international banking group.

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