Global Macro: Investors' Caution Could Spell Trouble for Stocks

NEW YORK (TheStreet) -- iShares 20+ Year Treasury Bond (TLT) gained on Thursday as rising U.S. unemployment claims and trouble in Ukraine outweighed comments from Federal Reserve Chairwoman Janet Yellen.

Yellen told the Senate Banking Committee that she would monitor data over the coming months to ensure recent soft economic numbers were due to weather, and not to declining economic momentum.

The market perceived her comments as bullish on the U.S. economy, but an unexpected rise in initial unemployment claims forced many to question the true strength of the labor market.

The Labor Department reported that weekly unemployment benefits increased 14,000 to a seasonally adjusted 348,000 claims, above the forecasted rise of 340,000 claims. The unemployment benefits four-week moving average shows that the indicator has steadily risen since September.

Unsure about the economy and worried about the conflict in Ukraine, investors are cautious about building equity positions, and so they have pushed funds into Treasury bonds.

Armed men took over parliament in Ukraine's Crimea region on Thursday, raising a Russian flag and sparking fears that a civil war could develop and divide the country.

The fears led many to flee emerging-market assets, such as Market Vectors Russia ETF (RSX), and invest in more stable, developed economies.

Equity investors were satisfied with Yellen's comments, pushing SPDR S&P 500 (SPY) to record highs, but the continued strength in iShares 20+ Year Treasury Bond index is concerning.

If investors continue to move funds into Treasury bonds over the coming months, as the Fed remains on the path of cutting its stimulus program, it could signal waning investor sentiment, leading to a correction in equities.

TLT Chart TLT data by YCharts

At the time of publication, the author had no position in any of the funds mentioned.

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