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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum
GLD 368.29+0.6%Nov 7 4:00 PM EST
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fred woodall
Julius Wong
To: bull_dozer who wrote (192200)9/27/2022 6:30:52 PM
From: bull_dozer2 Recommendations  Read Replies (1) of 217576
 
Crash Watch Becomes Crash Warning

So now, as the title of this post states, we’re officially moving from “Crash Watch” to “Crash Warning”. Why? Primarily because the sharp move higher in both nominal and real interest rates will soon become too heavy of a burden for equities to bare.

Could it be a swift move through 4.00% on the U.S. ten-year treasury note that does the trick? So far, the markets have been able to shrug off higher nominal rates, but you may recall that it only took a move to 3.25% in 2018 before equity disaster struck. Perhaps a ten-year yield above 4.00% would be a bridge too far this time? Perhaps. Either way, I think we're about to find out.
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Do you get the sense that there are three possibilities?

The TIP rallies and rejoins the SPY as real rates fall.
The SPY falls to meet back up with the TIP.
The two meet somewhere in the middle.
If the TIP remains near 106 or moves even lower, it's difficult to see how stonks remain firm. The chart above suggests a drop to near 250 on the SPY or about 2500 on the S&P 500. That would be a drop of about 30% FROM HERE! If you own mutual funds in your retirement accounts, are you prepared for this possibility?

The chart below shows this, too. Note that since the paradigm-shifting event of QE1 in March of 2009, the S&P 500 has fallen back to the same trendline on multiple occasions, all of them coinciding with some move by the Fed to jawbone or otherwise act to move interest rates higher. Isn't 2022 just the latest chapter in this ongoing trend of Federal Reserve shenanigans?

sprottmoney.com
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