The Big Bubble - Correlation S&P500 vs Treasury 30y
2007-2012: Convergence between S&P500 trend and yield on Treasury 30y USA:
- Downhill stocks leads to a reduction in yields on the bond market . The flow of money coming out of the US stocks and goes to US bonds for the "safe haven" - RISK OFF.
- Rise in share prices on stocks leading the market yield bonds to rise due to the vendite.Flow of money out of the US bond market and goes on US stocks - RISK ON.
START THE BUBBLE: The first divergence for Fed QE & BoJ: A rising index corresponds to a fall in yields = excess liquidity in the market - Bubble begins to swell and then be absorbed
THE BIG BUBBLE: The divergence between performance of the stocks and lower yields on the bond market is the highest ever. The bubble is always more swollen and the two lines more and more divergent. A Fed rate hike (and therefore yield) approaches the two lines (seen in early 2015) but if this were not enough the bubble may deflate and bring down the stocks..fly to normality?!
BE CAREFUL
- Downhill stocks leads to a reduction in yields on the bond market . The flow of money coming out of the US stocks and goes to US bonds for the "safe haven" - RISK OFF.
- Rise in share prices on stocks leading the market yield bonds to rise due to the vendite.Flow of money out of the US bond market and goes on US stocks - RISK ON.
START THE BUBBLE: The first divergence for Fed QE & BoJ: A rising index corresponds to a fall in yields = excess liquidity in the market - Bubble begins to swell and then be absorbed
THE BIG BUBBLE: The divergence between performance of the stocks and lower yields on the bond market is the highest ever. The bubble is always more swollen and the two lines more and more divergent. A Fed rate hike (and therefore yield) approaches the two lines (seen in early 2015) but if this were not enough the bubble may deflate and bring down the stocks..fly to normality?!
BE CAREFUL
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