Gary makes the case that US 10yr & 30yr Interest Rates will begin to decline and the Stock Market, especially Tech, will continue to soar - Robert Zurrer for Money Talks:
You thought I was done with the Amigos shtick, did you? Not by a long shot ma’am. They are the happy-go-lucky riders in play as the stock bull market churns on. They are the rising SPX/Gold ratio and stocks in general vs. gold (Amigo #1), rising US 10yr & 30yr yields (Amigo #2) and the flattening 10-2 yield curve (Amigo #3). On their current trends these goofy riders have signaled “a-okay!” to casino patrons playing the stock market and other risk ‘on’ items.
Taking our macro indicators out of order, let’s start with Amigo #2, who we have been noting to be bracing for something…
What is that something? Well, it is the targets for 10yr & 30yr bond yields we laid out 4-5 months ago in a bearish case for bonds; you know, back when everyone didn’t hate bonds as is currently the case under the much more recent expert guidance of Bill, Ray and Paul? It might as well have been Ringo, George and Paul making the call.
I am not trying to come off as a contrarian bond bull, deflationist. There are very valid reasons to be open to if not expect a new and secular bond bear market. But with the yields at our targets, which were established for a reason (being caution) and with the financial eggheads fully in unison, it has come time for caution on the bond bear stance and at least some aspects of a stock bull stance.
For my part, as written on several occasions in NFTRH and in public, Treasury bonds (T bills, 1-3yr, 3-7yr & 7-10yr) are now playing a balancing role in my portfolios and spitting out monthly income to boot. Is this an investment? Absolutely not. Not with Treasury bonds overseen by the chronic debtor AKA the US government and manipulated by the chronic inflator, the Federal Reserve.
But the long-term ‘Continuum’ chart has been kind of obvious, don’t you think? While the 10yr has hit target, the 30yr dwells just under its historical limiter (and target) at 3.3% (the monthly EMA 100).
At the same time the long bond, which goes opposite its yield, has come down to its EMA 100, which has historically limited declines. This time different? Maybe. There are no absolutes. But this is a risk vs. reward business.