TINA is the acronym for “there is no alternative,” a market mantra that reflected the frustration of investors who saw no alternative to stocks in a post-financial crisis world dominated by ultralow government bond yields as the Federal Reserve and other global central banks embarked on asset-buying programs and other forms of extraordinary stimulus.
A selloff in Treasurys has seen longer-dated yields rise quickly in recent weeks, playing catch-up with a long-running rise in shorter-dated yields. Yields and debt prices move in opposite directions.
Indeed, the rise in the 10-year Treasury yield TMUBMUSD10Y, +0.42% to a more-than-seven-year high above 3.26% on Oct. 9 was blamed by some investors for a subsequent U.S. stock-market selloff that turned into a global rout. That selloff, in turn, sparked a flight to traditional haven assets, like Treasurys, pulling yields back down. But they began to creep back up, with the 10-year yield ending Friday near 3.195%.
The question for investors is whether the yield on Treasurys and other lower volatility alternatives is attractive enough to justify shifting money out of stocks. For one money manager, the answer is, not yet.
“While investors now have some fixed income alternatives to equities, we do not consider them attractive enough yet to warrant underweighting equities relative to fixed income. The backdrop for equities remains sufficiently supportive, valuations are favorable relative to historical norms, and upside risks at least partly offset the downside risks we continue to monitor,” said Mark Haefele, chief investment officer at UBS Wealth Management, in a note.
It comes down in part to the reason that yields are rising. In the view of Haefele and stock market bulls, it’s because the U.S. economy remains robust rather than because investors fear a surge in inflation that would hurt stocks.