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Trends & Analysis
News
Is Amazon a best-buy for the holidays?
News
China stocks end mixed despite PBoC announcement
News
Asia stocks rise on prospects of Fed easing hikes
News
HP joins the tech layoff spree
News
Will the euro give the bulls 200 reasons to smile?
News
Best Buy shares spike amid upbeat Q3 print

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Asset Watch

Can low rates keep Home Depot riding high?

 

Thursday, November 17, 2022

In an interest-rate-sensitive world, the movement of global bond yields has a material impact on investor sentiment. Plus, with the real estate sector being one of the most affected, higher interest rates often trigger substantial outflows.
However, as U.S. Treasury yields recently consolidated, could Home Depot benefit in the short term?
The largest home improvement company in the U.S. surpassed analysts’ third-quarter estimates on both the top and bottom lines on Nov. 15. After re-affirming the company’s full-year guidance, the CEO said shoppers remain “resilient and engaged.”
“We’ll continue to take share in any operating environment,” he added. “The fundamental shortage of housing in this country and the ageing of homes is incredibly strong for our space in the medium to long term.”

So, while inflation and recession fears permeate, the macroeconomic backdrop remains relatively constructive. Additionally, Home Depot’s 20-day moving average created support during the July through August rally, and the U.S. 10-year Treasury yield has been a reliable 2022 indicator.

The black line on the chart tracks the inverted movement of the Treasury benchmark, which means a rising black line equals a lower 10-year interest rate. As yields rose throughout 2022, Home Depot suffered. However, if the black line continues its ascent (interest rates falling), Home Depot’s optimism could persist.

As a result, should you remain long until the 20-day MA breaks?


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