Short-term Stock/Yield Correlation Continues

Remember not long ago when stock investors were encouraged by the media to fear rising long-term interest rates? Remember how we said that stocks would likely rise along with rates until the limiters were reached on the Continuum ™? Remember how we even gave the process a cute metaphor known as Amigo #2?

10 year yield

30 year yield

Stocks rose with the yields and they have turned down with the yields. In other words, they are and have been roughly in positive correlation.

tyx, spx

And this morning is no exception. From

To me this is more evidence that stocks have been the primary beneficiary of the Fed’s balls out inflationary policy since 2009. It seems to be a signal that more inflation will be needed to give the bulls a chance. That inflation would be fiscal (political) as opposed to the Fed’s monetary inflation operations.

It’s still a work in progress and no, I don’t think broad stocks can maintain a positive correlation if yields get out of hand (i.e. break the limiters in decisive fashion and keep moving up).

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