US stocks retreated on Wednesday, one day after the benchmark S&P 500 Index (^SPX) hit a new all-time high. The bond market was once again the culprit. One fund I like here is the Vanguard Morningstar Mega Cap Growth ETF (MGK), says Brian Kelly, editor of MoneyLetter.
The 10-year Treasury yield hit its highest level in 24 years (5.37%) before backing off, which eased pressure on stocks later in the day. A solid 10-year auction helped matters. Federal Reserve minutes indicate participants expect one more hike this year, but the timing is in question.
Vanguard Morningstar Mega Cap Growth ETF (MGK)
Two of our major global stock markets posted gains during the one-week reporting period. From Oct. 1 through Oct. 7, the S&P 500 gained 2%, the Euro Stoxx 50 dropped 1.4%, and the Nikkei 225 surged 4.9%. The Shanghai Composite has been closed all week for a national holiday.
Despite the bond market selloff and uncertainty over the election, Iran, and inflation, the markets have been surprisingly resilient. But gains have been concentrated primarily in the Magnificent Seven and tech sector.
With economic growth and corporate profits holding up well, there is a path for further gains in equities. But interest rates are a significant headwind. A leveling or slight correction in market interest rates would provide fuel for both stocks and bonds.
As for MGK, it seeks to track the performance of the CRSP US Mega Cap Growth Index. The index is a float-adjusted, market-capitalization-weighted index designed to measure equity market performance of mega-capitalization growth stocks in the US. The advisor attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index.