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that leaves investors wondering whether after yesterday's record gains for all major indices all five of them can the stock market continue to celebrate and should your portfolio celebrate let's bring in wall street's most followed and closely widely looked at economist alliance chief economic adviser mohamed ellerian thank you for being here muhammad considering most of the job loss carnage came from travel leisure and restaurants what message are you getting from this report as it pertains to people's portfolio positioning so not much in terms of portfolio a lot about the economy liz but not much in terms of portfolio what it tells you is the economy is weakening i worry that the next job report will also involve job losses and that is coming at a time when the labor market is already suffering so the economy is weakening and weakening quickly the markets are focused elsewhere they're focused on stimulus their focus on central banks and i suspect the markets will continue to brush off the news on the economy and the path of least resistance for now continues to be up okay uh and yet you look at these numbers now the dow is is solidly well 13 points to the upside i'm calling that solidly positive here s p better by 12 the nasdaq up 87 it just appears that this disconnect between what's going on currently with the economy and then of course the froth in the markets is is still very much in play do you ride this wave so first this is the biggest disconnect i've ever seen and i could have never imagined that the markets could be so disconnected but then i would have never imagined that the central banks would pump in so much liquidity that would end up in the marketplace that's why there's this notion of a rational bubble it is a bubble because it's unrelated to it to fundamentals but it's rational because it depends on all these injections of liquidity look i tell people it depends on how comfortable you feel with a rational bubble that is what you're investing in right now and if you feel comfortable go right ahead i admire people who do feel completely comfortable i like to be selective i like to have defensive elements to my positioning but you know what that is has been the right call served away for as long as it slots just make sure you get off it in case it gets interrupted and we saw today how sensitive the market is to various talk about stimulus of course and and that's exactly what joe biden just said in the last uh i want to call it uh 13 minutes he said that he will spend trillions but i i need to show our viewers the 10-year bond yield for the first time since what nine months ago it finally hit 1.1 so as you look at that you know this has been the these extraordinarily low bond yields of 0.5 0.6 now we're at 0.118 at the moment 1.118 is the allure of equities still as strong when the actual exact thing on your screen the 10-year treasury yield which had been so much lower and underpinned and buttressed these markets is the allure still there if these yields continue to rise for equities is the allure there i mean it is for now but keep an eye on that that has become the most important number to look at i look at it first thing every morning because the higher the yield goes the more problematic for markets one because of relative attractiveness as you just pointed out two because it puts the fed in a really difficult position the fed will not be happy to see the yield go up despite the trillions of dollars it's been buying in bonds so keep an eye on that that is perhaps the most critical number right now it's still manageable but we can't continue to see it go higher and higher and expect the equity market to go higher is there a tipping point is there a support level where you'd say now it's not manageable anymore you know it's the i those questions are really hard to answer because they they deal with psychology and behaviors um the question that everybody will ask is what is your tipping point because they'll want to know what the other person's tipping point is and you never get a handle on this so yes there is a tipping point i don't know what it is liz okay uh richard clara the vice chair today said that rates will stay at current levels until meaning fed funds futures rates fed funds rates until inflation exceeds two percent for some duration so uh current levels and then he also said that they keep the bond purchases going until uh the end of 2021 i mean that's shorter than what we had heard before from jay powell the chief of the federal reserve which was 2023.
yeah but i i wouldn't i wouldn't worry too much i mean the minutes that came out on wednesday tell you that the fed has no desire to taper and when it tapers it's going to do it really carefully and very gradually i think the problem and we're seeing it in the marketplace is that the fed can control anything up to the two three year and maybe even four year point of the bond market but it can't control the 10 and 30-year and that's what the market has been looking at yeah yeah and finally uh any points of froth in the market we've got we've got spac land with all of these spacks that have done incredibly well not to mention bitcoin which was above 40 41 000 earlier today anything worry you about that oh lots where you're looking at someone who who bought bitcoins below five sold them at 19 until they had done well and watched it double in less than a month okay i mean if i i mean there's lots and lots of evidence of excessive risk taking um but so far it's been well rewarded um you can keep this game going i want to stress you can keep it going by pumping more and more liquidity but these are artificial valuations so just be careful out there mohamed have a good weekend and and thank you very much great to have you on the show we'll see you next time
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