It looks to me like the top is in for bonds. Here is the 30yr US treasury.
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So, some points to ponder.....
1. If bonds have truly topped, does that mean that the stock market has bottomed? Or can they both decline at the same time? Bonds were on a similar trajectory up with equities through Oct 99 and then started falling. They then bottomed in January 2000 where they started their move to the recent highs. From what I can see, there doesn't necessarily need to be a positive or negative correlation between bond market and stock market movement.
2. If bonds go down, yields will go up. Fed will likely have to follow with rate hikes. This should have the effect of tightening money supply. Will this adversely effect the stockmarket?
3. If interest rates go up, will that kill the consumer buying that has kept the market afloat? Will it cap the housing market and cause a decline there? Will there be one final mad rush to refinance homes to lock in low rates?
4. It still seems somewhat like a checkmate to me. If interest rates go lower that will further devalue the USD and drag the market down. If rates go up, we could have a little mad rush to the exits on bonds. That would free up cash to go into stocks, but in the meantime, it would have a negative effect on the consumer spending that has kept us from going into an economic freefall.
5. I am just thinking off the top of my head, anybody wants to punch holes in or add to my thoughts, please do. |
