Investor revolt

   By Guest Blogger Ryan Lewenza

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During the landing of Apollo 13 on the moon, NASA astronaut, John Swigert, famously said, “Okay, Houston…we’ve had a problem here.” This came to mind after observing an interesting (and concerning) trend. Investors, it seems, are starting to revolt.

It started in the art markets of all places. A few weeks ago, Sotheby’s had their spring market auction, and it didn’t go according to plan. The prized piece from the spring collection was Albert Giacometti’s Grande tête mince (Grande tête de Diego). The bronze cast was one of six from the famous Swiss artist and was expected to fetch over US$70 million at the auction.

The seller must have felt confident in getting that price as they declined to set a minimum price guarantee, a common practice for expensive art pieces. As the auctioneer started the bidding process at a rock-bottom price of US$59 million, bids started to slowly trickle in but stalled around the US$64 million level. In the end, the piece failed to sell and in art world parlance, the auction ‘burned’ (i.e. it didn’t sell).

Albert Giacometti’s Grande tête mince

Source: NY Times

We’re seeing a similar investor revolt in the US Treasury market. Last week the US Treasury Department auctioned US$16 billion worth of 20-year Treasury bonds, a relatively small auction for the Treasury Department. They received tepid demand and had to price the bond deal at 5.05% – one of the highest levels in a few years.

Whether it was the recent Moody’s downgrade of US debt from the highly coveted triple A rating or the current Republican spending bill which is estimated to add another US$3.7 trillion to the national debt, bond investors are starting to quietly revolt by demanding higher yields from US government bonds.

US government bond yields continue to rise

Source : Stockcharts.com, Turner Investments

Finally, stock investors are also starting to revolt, particularly with US equities. Year-to-date, US equity markets have underperformed with Canadian, international and emerging market equities standing out.

President Trump and his chaotic tariff rollout is definitely a factor. But another factor could be the expensive valuations of US stocks. As seen below, US stocks are currently trading at a high 22x forward earnings (a premium to their long-term average of 19x) compared to other global markets like Canada and European equities at 16x.

Global equity market P/E ratios

Source : Bloomberg, Turner Investments

We’re starting to see some signs of investors pushing back and demanding more attractive terms (e.g. higher interest rates). Now, the sky is not falling as the US economy remains on solid footing and US corporate earnings (S&P 500) just grew at 13% yoy in first quarter. But with Trump’s tariffs, and this trend of more selective buyers we should keep on our toes.

Ryan Lewenza, CFA, CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Investment Advisor, Private Client Group, of Raymond James Ltd.

Source: https://www.greaterfool.ca/2025/05/31/investor-revolt/