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Stock/Bond Correlation

Jun 10 2021

Stock/Bond Disconnect?

  • Jun 10, 2021

In the May Green Book, and again in the May 21st issue of “Chart of the Week,” we discussed the trailing one-year correlation between weekly percentage changes in the S&P 500 and the 10-year Treasury bond yield. Rollovers from high levels in this correlation have signaled most of the important pullbacks in the bond market over the last 20 years.

May 21 2021

What The Two-Month Stall In Bond Yields Tells Us

  • May 21, 2021

The 10-year Treasury yield has absorbed the past two months’ worsening inflation numbers by going exactly “nowhere.” Bond investors seem to be all-in on the Fed thesis that the inflation pickup is just transitory.

During the recent consolidation, however, the Treasury yield showed a subtle change in character—one that suggests there might be more inflation paranoia than meets the eye. The 10-year yield’s daily correlation with stock price movements flipped negative, and then plummeted toward a 21-year low. 

May 07 2021

Two More Reasons For Yields To Rise

  • May 7, 2021

Bond yields have paused in the last several weeks, but we think it’s likely to be a pause that “refreshes.” Many bond indicators, including the Copper/Gold ratio popularized by Jeffrey Gundlach, suggest yields should be moving dramatically higher in the months ahead.

Nov 07 2019

Simple Bond Model Says “SELL”

  • Nov 7, 2019

In our minds, the big story is not the nominal new highs in the blue chips, but rather the rapid changes now occurring on both an “intra-market” and “inter-market” basis. In the case of the latter, we have an important new signal from a simple correlation model we developed earlier this year.

Aug 07 2019

Odds & Ends

  • Aug 7, 2019

Here are some brief follow-up notes on topics covered in recent months’ Green Books.

Jul 05 2019

Correlations Are Worthless, Except This One

  • Jul 5, 2019

We’ve never understood investment quants’ desire to project correlations among assets. Such correlations are inherently unstable.

Oct 05 2018

Stocks Not Yet Yielding To Yields

  • Oct 5, 2018

Regardless of how it’s measured, the liquidity available for global stocks continues to run off.

Sep 28 2018

New Highs In Stocks Have Some Unwanted Company

  • Sep 28, 2018

In recent commentaries, we’ve highlighted the surprising number of U.S. stocks making 52-week lows on both a daily and weekly basis, a sign that the market’s push higher has become more fractured. While pondering the significance of those lows, however, we missed a new 52-week high last Friday in a series we think will be especially critical to the stock market’s near-term fortunes: the 10-year U.S. Treasury bond yield. Specifically, the yield matched its weekly closing high of 3.07% posted on May 18th.

Jun 29 2017

Where The Bear Lingers

  • Jun 29, 2017

While the next recession could be caused by a variety of factors, we suspect the recovery will eventually end like most post-war expansions, only after a significant rise in interest rates.

Dec 07 2016

Rising Rates: Not Always A Death Knell

  • Dec 7, 2016

While the Dow Jones Bond Indicator has stood the test of time, history shows that rising bond yields are not always a bearish stock market phenomenon.

Jul 09 2013

Bonds & Cyclical Stocks “Decoupling”?

  • Jul 9, 2013

The relationship between U.S. Treasury bond yields and the relative performance of cyclical stocks versus their defensive consumer counterparts appears to be changing.