Who Is Right – Stocks Or Bonds

Posted by on February 28, 2017 12:10 am
Tags:
Categories: Uncategorized

Treasury yields, which move inversely to prices, declined to their lowest levels in more than five weeks on Friday. The stock market, on the other hand, is sitting at or near historic highs.

Which metric is spot on? 

Well, if we throw in VIX/VXX readings for a good measure, it appears the stock market has got this one figured out. But it might not be as easy as that.

The Fed is worried about a key measure in the stock market

  • The Federal Reserve said January 22 it is worried about the "low level of implied volatility in equity markets"
  • The VIX, a gauge of market fearfulness, has been bouncing around at historic lows
  • That seems at odds with the "considerable uncertainty" the Fed expects in US policy

We wrote about exactly this last week. Realized Volatility At 20 Year Low – Chart Of The Week

Listen, there are a number of ways to look at the "conundrum" above. We can either assume that foreign buyers are scooping up treasuries in their search for yield, any kind of yield -OR- the stock market might be getting ahead of itself.

I have a feeling we will soon know the answer.

If you would like to find out exactly what happens next based on our Timing and Mathematical work, please Click Here.