9/10 bond yields move with economic growth. If inflation is out of control, which it is, it can take 12-24 months for bond yields to come down. It's been well over a year of slowing economic growth (manufacturing PMI growth) and bond yields are approaching a 9-year resistance level around 3% - 3.25%. Is this a bearish divergence for yields or decoupling of...
The last time the Fed began reducing the balance sheet, the Dollar was headed for resistance and eventually broke out of the range. This time it looks very similar.
How long until commodities return to correlation with real growth? Demand destruction from inflation will eventually catch up to commodities and we should see a massive pullback.
When the Dollar surges against falling bond yields stocks experience a huge risk off event. Sometimes the bond market sniffs it out early, than the dollar surges.
9/10 times bond yields and growth peak around the same time unless there’s a real concern of inflation.
This chart represents 40 years of correlation between slowing economic growth (PMI below 50), declining bond yields and rate cuts. Typically when growth peaks bond yields start declining but when PMI’s drop 50, bond yields decline further. Sometime after OMI’s drop 50 the Fed starts cutting rates.
Multiple SPY corrections when bonds demand picks up and at the same time dollar demand picks up. Safe-haven risk-off psychology.
For the past 40 years, 8/10 times growth peaked, and bond yields rolled over. The two times this didn't happen were in the early '80s and 2022. Between 2022 and the early '80s, the two things in common are high inflation and surging oil prices.
10 Year Bond Yield cycles against the YoY Inflation Rate
This represents the correlation between Bond Yields cycles and economic growth (ISM/PMI) from 2008-2022
Bond Yield cycles from 2014 to 2022 from bottom to top. SPY coorelation
Bond Yield cycles from top to bottom w/SPY. From 2008-2014
A representation of Bond Yield Cycles from bottom to top and against the DXY