AndyM
Short

Bonds are at critical point, moving lower may cause SPX sell-off

NASDAQ:TLT   ISHARES 20+ YEAR TREASURY BOND ETF
126 4 8
I believe the downtrend in bonds is not over, bonds may still crash another 20% before entering a correction. This may trigger a very violent sell-off in equities .

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moneycat8
5 days ago
excuse my ignorance, can you please explain the relationship? im a newbie.
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AndyM PRO moneycat8
5 days ago
@moneycat8, hi! It's about the cost of debt for companies and households. A sharp rise in bond yields increases the cost of borrowing for the companies and households, the cost of mortgage goes up for instance, the cost of auto loans also gets higher - the rise in bond yields has a slowdown effect on the economy, people are not able to consume as much, companies are not able to finance their growth so easily, and as a result the future growth takes a hit, which eventually gets reflected in the stock prices. This is why every rise in bond yields over the last 20 years caused a market crash or at least a substantial sell-off. Here's a link on that:
http://www.zerohedge.com/news/2016-11-17/horseman-capital-sharp-spike-yields-preceded-every-market-crisis-last-20-years
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moneycat8 AndyM
5 days ago
@AndyM, i see...much appreciated.
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AndyM PRO moneycat8
5 days ago
@moneycat8, also is if you hold stocks which are worth 100$, and they deliver 2.2% of dividends every year, and if you see bonds going even cheaper than that, yielding 3%, if will make total sense to sell the stocks and buy bonds. This is what the market may very well do, repricing the assets to the new reality of higher interest rates.
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