"The bond market needs to hire a new public relations firm," says former fund manager Richard Breslow, reflecting on the panacea of negativity surrounding the weakness in global bond markets. His suggestion is simple - "get over it" - bond yields are going higher and you better get used to it, it's just needs to be seen for the 'positive' that it is...
Via Bloomberg,
For dip-buyers in the S&P 500, 2017 has actually been a tough year... because there hasn't been any.
As JPMorgan notes, 2017's 3% intra-year decline is the smallest since 1980 (tieing with 1995 which saw a 34% return)
This 3% drawdown (for now), continues a 6 year streak of drawdowns that are dramatically below the longer-term average of 14.1% drops intra-year.
But what happens now that Central Bank balance sheets are set to stop their expansion?
After falling for the first time this year last week, Baker Hughes reports US oil rig count rose once again (as perhaps Cindy impacted drilling last week) for the 23rd week in the last 24.
With The Fed is full 'taper' mode and The ECB hinting, the world is left to rely on Kuroda to single-handedly buy-the-dip in stocks and maintain bond yields at the mandated level. With Japanese stocks fading in the last two weeks (as bond yields spike), it appears the ubiquitous 'hand of god' has disappeared...
And judging by the biggest Japanese equity fund outflows in 8 years, the fear is spreading...
Stocks are now in very serious trouble.
The S&P 500 has fallen to test its “election rally” trendline. If the market breaks down here, there’s essentially one giant “air pocket” down to 2,200 or so.
The bad news is that high yield credit (HYG), which leads the S&P 500, has already broken its respective trendline. This is a serious “risk off” signal.
Indeed, it gets worse. HYG is in fact breaking out of a massive rising wedge pattern that could very well mark the end for the 9 year bull market in risk.
What would this mean for stocks?