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TRUIST Perspective: Rising yield and less Fed accommodation to inject volatility but history suggests primary market trend remains higher

TRUIST Perspective: Rising yield and less Fed accommodation to inject volatility but history suggests primary market trend remains higher

January 6, 2022

What happened?

After a strong start to the year, volatility in markets has risen. Investors appear concerned that the Federal Reserve (Fed) may reduce policy accommodation at a faster rate than previously expected. At the same time, the 10-year U.S. Treasury yield has jumped from a low of 1.35% in late December to above 1.70% for the first time since April 2021.

Our take

A shift in Fed policy often injects volatility into markets. Indeed, this is one of the key points we discussed in our 2022 outlook and is a reason behind why we are looking for more moderate market returns and more normal pullbacks.

That said, stocks have generally had positive performance during periods where the Fed is raising short-term rates because this is normally paired with a healthy economy. A growing economy supports corporate profit growth, which supports the stock market.

Moreover, with U.S. GDP output above pre-pandemic levels, annual job gains in 2021 at a record level, and inflation well above average, it’s hard to justify maximum monetary policy accommodation when the economy is no longer in crisis.

However, it will be a long time before one could argue that Fed policy is restrictive, especially when one considers that yields after inflation, known as real yields, remain in deeply-negative territory. This stands in sharp contrast to 2018, when markets had a sharp selloff late in the year when real yields were slightly positive and investors were concerned the Fed was becoming too aggressive.

Notably, stocks have risen at an average annualized rate of 9% during the 12 Fed rate hike cycles since the 1950s and showed positive returns in 11 of those instances. The one exception was the 1972-1974 period, which coincided with the 1973-1975 recession. Our work suggests near-term recession risks remain low.

Likewise, stocks have generally risen during periods of rising 10-year U.S. Treasury yields. In a study of 15 periods where intermediate rates rose by at least 1.5 percentage points since 1950, stocks averaged an annualized gain of 12%. The exceptions have coincided with recessions or economic slowdowns.

Importantly, intermediate-term rates are only back to pre-pandemic levels. This is certainly justified in our view given the aforementioned economic and inflation backdrop. It’s also consistent with our fixed income team’s outlook for higher rates and higher volatility.

Even with the recent rise in 10-year yields and stocks, the equity risk premium, a metric that compares the valuation of stocks to bonds, remains at a level that has historically corresponded with stocks outperforming bonds on a 12-month basis by an average of almost 11%. Accordingly, we do not see the current level of the 10-year U.S. Treasury yield as a significant threat to the bull market.

To read the publication in its entirety, please Download PDF

Keith Lerner, CFA, CMT

Co-Chief Investment Officer
Chief Market Strategist
Truist Advisory Services, Inc.

Shelly Simpson, CFA, CAIA

Senior Investment Strategy Analyst
Portfolio & Market Strategy
Truist Advisory Services, Inc.

Right to Know Law Tips for Government Contractors

Right to Know Law Tips for Government Contractors

January 13, 2022

Companies that contract with state and local agencies in Pennsylvania can access a lot of information about an agency’s bidding process through strategic Right to Know Law (RTKL) requests.

Under the RTKL, all agency records are presumed to be public and disclosable unless an exemption or privilege applies. There are three key exemptions to be aware of when requesting records relating to the contracting process:

  • 708(b)(26) – A proposal pertaining to agency procurement or disposal of supplies, services or construction prior to the award of the contract or prior to the opening and rejection of all bids; financial information of a bidder or offeror requested in an invitation for bid or request for proposals to demonstrate the bidder’s or offeror’s economic capability; or the identity of members, notes and other records of agency proposal evaluation committees established under 62 Pa.C.S. Sec. 513 (relating to competitive sealed proposals).
  • 708(b)(10)(i)(A) – records reflecting “the internal, pre-decisional deliberations of an agency, its members, employees or officials or pre-decisional deliberations between agency members, employees or officials and members, employees or officials of another agency, including pre-decisional deliberations relating to a budget recommendation, legislative proposal, legislative amendment, contemplated or proposed policy or course of action or any research, memos or other documents used in the pre-decisional deliberations.”
  • 708(b)(11) – a record that constitutes or reveals a trade secret or confidential, proprietary information.

Section 708(b)(26) is specific to the procurement process. You cannot use the RTKL to get a copy of your competitor’s bid during the bidding process. Furthermore, if your company submits financial information to show its economic capability, your competitors cannot access that information via the RTKL.

Section 708(b)(10)(i)(A), the exemption for the agency’s internal pre-decisional deliberations, prevents access to documents reflecting the agency’s deliberative process. This makes it difficult, if not impossible, to access the agency’s internal emails or notes discussing the merits of the bids it has received for a project, even after the bid has been awarded.

Finally, Section 708(b)(11) protects a bidder’s trade secrets and confidential, proprietary information. To the extent their bid included confidential, proprietary information (e.g., technical information about their product or service, component pricing, or other sensitive data), that information should be redacted before a copy of their bid is released.

Notwithstanding the above exceptions, government contractors can still access useful information. You can request copies of all proposals for a prior version of a contract you intend to bid on to see what other companies have put forth, who the repeat players are, and what good and bad bids have been put forth. If you’re interested in learning more about a particular competitor, you can request all bids that the company has submitted for any project with the agency (excluding currently open bids).

Government contractors are not restricted to requesting bidding information only. You can request communications between the agency and its contractors, which may help you analyze the nature and strength of that relationship. Contractors should think creatively about the types of documents that would help them strategize and gain a competitive advantage. Consulting with counsel when drafting and submitting your request can also streamline the process and ensure you are requesting the information you are entitled to receive.

Author: | 267.338.1328

Big Announcements from Maryland Tech Council

Big Announcements from Maryland Tech Council

Please see important information below regarding our office move, guest blogs and member videos! Let me know if you have questions.  I’m looking forward to seeing you soon!

  • Big Move

    Maryland Tech Council is saying goodbye to our old digs on September 20, 2017.  Please make note, our communications will be down that day and we will resume full activity on September 21, 2017.  MTC’s new headquarters will be located at Launch Workplaces in Gaithersburg MD, 9841 Washingtonian Boulevard, Suite 200, Gaithersburg MD 20878.

  • Be a Guest Blogger

    Maryland Tech Council is launching the Member Point of View (POV) guest blogs.  We are inviting members to submit content for our blog page.  The content will be focused on your niche/industry where you can add a new POV for the MTC audience. Our goal is to position you as an authority and well-known name in the industry. And for us, we will have fresh new content for the page and get new readers to our blogger community.  It’s simple and a win-win.  We will have numerous categories that you can write articles for; those will be available in the next few weeks.  We are kicking off the Member POV blogs during Cyber Security Awareness month in October.  If you are interested in submitting a blog on that topic, please let me know and we will get you started.

  • Become a Familiar Face in the Community

    Maryland Tech Council is revitalizing the “member spotlight” that is featured in the VIBE E-newsletter. We now offer the opportunity to feature you, the member, through our new and exciting video blog or vlog.  The video will be 30-45 seconds, prerecorded at our offices, about your company. We will then feature the vlog in our monthly VIBE E-newsletter.  The vlogs allow us to distribute the member spotlight through other formats such as twitter, Facebook, etc. to get you more exposure.  I mean, we are the Tech Council, right?  


Remember, everyone in your company is a member of MTC. Please share this important information with your team.

Warm Wishes,

Michelle Ferrone
EVP, Operations
Maryland Tech Council