00:00Cam Dawson of New Edgeworth writing, the bond bull market is dead. Yields are no longer in a downtrend. They
00:05are in clear, distinct uptrends. Cam joins us now for more. Cameron, good morning.
00:10Good morning. Are you ready to step in and buy? Well, look, I think that we have to appreciate that
00:13we could be in the midst of a now secular uptrend in bond yields, very different than the secular downtrend
00:19in bond yields that persisted from 1981 until the low in 2020, but that you could still have periods of
00:26countertrend rallies or points where bonds are oversold
00:29yields are effectively overbought. And that's probably where we are today. If you look at an RSI and the 10
00:35year yield, it looks like you're in overbought territory.
00:38So you could come in a little bit and have some tactical buying opportunities. And even for investors who have
00:43longer term hold periods, these yields are starting to look really juicy.
00:47If you look at an after tax munine yield for a lot of our investors that are high taxable investors,
00:52you're looking into the low double digits.
00:54So some of these things start to look attractive. And also, the higher your yield goes, the more you have
01:00a buffer for the ability to absorb price shocks in your overall return.
01:04But the message still is this is not a world of a downtrend in yields anymore. And that has big
01:09implications for assets across the asset class spectrum.
01:13What does that mean for the relationship between bonds and, say, equities?
01:16Well, I think that it continues to put downward pressure potentially on valuations.
01:20We've been arguing for a long time that you've been seeing the impact of higher bond yields on valuations.
01:26You just haven't felt it because earnings have been so strong.
01:30So if we roll into 2027, it's good to remember that the effectively or the earnings growth rate that we
01:35get next year will be half of what we get this year.
01:38So that's a lot less buffer to absorb some of these macro headwinds.
01:42And that's assuming that you can meet next year's numbers, which we think are looking somewhat high, given the fact
01:48that they've embedded a lot of margin expansion.
01:51And you have those tough comps that you're comping over in 26 that does create an incredibly high bar.
01:56So that's a lot more.
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