Stock Market vs Govt Bond Market. At the Dawn of Changes
It's been 3 months or so since the late March quarter bullish exuberance took the stock market, Ethereum (ETHUSD), Bitcoin (BTCUSD), other crypto assets to their new 52-week and all-time highs.
This is now changing, while the stock market and cryptocurrency markets have stopped making new highs, despite the fact that Roaring Kitty is once again deafening everyone with her phenomenal calls.
Quite high inflation reports for the first quarter of 2024 became a kind of “cold shower” both for the market and for expectations of a possible reduction in interest rates, while the markets have been living this still unfulfilled dream for almost the last year and a half.
The Federal Open Market Committee is unlikely to adjust rates at its upcoming next meeting on June 11-12.
In any case, the prospect of any immediate rate adjustments is estimated at a modest 0.1 percent.
It has been nearly a year since the FOMC last raised the federal funds rate to its current target range of 5.25% to 5.5% in July 2023. And while FOMC members have signaled that labor market weakness could force them to cut interest rates, the labor market remains broadly resilient and unemployment low.
Fixed income markets are forecasting that September could be the first interest rate cut of the cycle. However, this is not certain as the estimated odds are currently around 50%. And again, these forecasts implied by the market can quickly adapt to economic news, and again - turn out to be unfulfilled dreams, just like the dreams of rate cuts that, as discussed above, markets have been living with for the last year and a half.
The main technical chart is the ratio, between iShares Core S&P 500 ETF (IVV) that is similar to mostly known SPDR S&P 500 ETF TRUST (SPY) on the one hand, and Ishares 20+ Year Treasury Bond ETF (TLT) on the other hand. Both ETFs (IVV, TLT) were taken in "Total return" format.
In technical terms, the graph indicates on Bullish upside channel, as right here we're near its upper line, exactly like 17 years ago in second quarter of 2007.
Auxiliary RSI(14) chart indicates also that Stock/ Bond ratio is too overheated in favor to stocks.
The idea should not be seen as a call for immediate action.
However, it is wise to keep in mind that investing in stocks can seriously underperform Govt Bonds in the medium to long term.
This is now changing, while the stock market and cryptocurrency markets have stopped making new highs, despite the fact that Roaring Kitty is once again deafening everyone with her phenomenal calls.
Quite high inflation reports for the first quarter of 2024 became a kind of “cold shower” both for the market and for expectations of a possible reduction in interest rates, while the markets have been living this still unfulfilled dream for almost the last year and a half.
The Federal Open Market Committee is unlikely to adjust rates at its upcoming next meeting on June 11-12.
In any case, the prospect of any immediate rate adjustments is estimated at a modest 0.1 percent.
It has been nearly a year since the FOMC last raised the federal funds rate to its current target range of 5.25% to 5.5% in July 2023. And while FOMC members have signaled that labor market weakness could force them to cut interest rates, the labor market remains broadly resilient and unemployment low.
Fixed income markets are forecasting that September could be the first interest rate cut of the cycle. However, this is not certain as the estimated odds are currently around 50%. And again, these forecasts implied by the market can quickly adapt to economic news, and again - turn out to be unfulfilled dreams, just like the dreams of rate cuts that, as discussed above, markets have been living with for the last year and a half.
The main technical chart is the ratio, between iShares Core S&P 500 ETF (IVV) that is similar to mostly known SPDR S&P 500 ETF TRUST (SPY) on the one hand, and Ishares 20+ Year Treasury Bond ETF (TLT) on the other hand. Both ETFs (IVV, TLT) were taken in "Total return" format.
In technical terms, the graph indicates on Bullish upside channel, as right here we're near its upper line, exactly like 17 years ago in second quarter of 2007.
Auxiliary RSI(14) chart indicates also that Stock/ Bond ratio is too overheated in favor to stocks.
The idea should not be seen as a call for immediate action.
However, it is wise to keep in mind that investing in stocks can seriously underperform Govt Bonds in the medium to long term.
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