When you are a keen observer of markets, it’s easy to get caught up in the day-to-day gyrations and forget about the big picture.
It is extremely rare to see a shift in a four-decade-long trend, so we rarely contemplate such a thing.
In today’s ‘Closing Bell’ video, I begin by showing you a 100-year chart of the US 10-year bond yield.
You will clearly see the shifts in the long-term trends over that time and should come away with a deeper appreciation of the importance of the moves we are seeing in bond yields worldwide.
I have often spoken about the seriousness of the breakout above 3.5% in the US 10-year bond yield. And I warned you that yields could race higher at a rapid pace above there as forced liquidations take hold.
It looks like that is taking shape, with the yield racing to 4.23% over the past five weeks. There are no signs of a reversal, and this is a major breakout, so yields could surprise to the upside, which would place downward pressure on stocks.
Equities have been performing quite well in the face of yields heading higher over the last month. However, the technical situation is still bearish, and another leg lower can ignite a serious chain reaction to the downside.
Elon Musk said the Fed is looking in the rear-view mirror at inflation, and he is seeing more signs of deflation than inflation at Tesla. Many commentators are coming out and saying the Fed will raise rates too far, too fast and cause a hard landing.
Without some signs from the Fed soon that they are softening their hawkish stance, the charts are saying that we are heading towards some serious volatility, so the name of the game remains capital preservation above everything else.
Regards,
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Murray Dawes,
Editor, Money Weekend
