🔜 20+ Year Treasury Bond Market. Perhaps This Is The End
Updated
US stocks surprised much of Wall Street this year with a strong run that defied decades-high interest rates and recession calls. The rally was fueled by slower inflation and hype over artificial intelligence.
But more recently, the Federal Reserve's unwavering higher-for-longer rate stance and a deepening bond-market rout have had a sobering effect on equities sentiment, with the S&P 500 index halving its year-to-date gains.
Indeed stock valuations are looking increasingly stretched, raising the risk of a correction.
One such indicator in particular is flashing RED - the relative valuation of stocks versus the debt market.
SPX / ICE BofA Corporate Total Return Index
In August this year, the S&P 500
SPX climbed to levels last seen during the peak of dot-com boom, relative to an index that tracks the US corporate bond market.
The gauge is still holding near those highs, despite the recent pullback in equities.
The metric last surged this high in the spring of 2000 — and that was followed by a multi-year meltdown in stocks that saw the S&P 500 crash 50% between March 2000 and October 2002.
SPX 50% Decline During 2000-2002
Another indicator that shows the richness of stocks relative to debt is the so-called equity risk premium — or the extra return on shares over government debt, which is considered a safer form of investment. The metric has plunged this year lows unseen in decades, indicating elevated stock valuations.
"Equity risk premium is near its worst ever level going back to 1927. In the 6 instances this has occurred, the markets saw a major correction & recession/depression - 1929, 1969, 99/00, 07, 18/19, present," research firm MacroEdge said in a recent post on X (ex-Twitter).
The so-called equity risk premium (earnings yield minus bond yield) recently fell to a new cycle low and remains well below historical averages. In other words, the stock market has become more expensive relative to the bond market despite the recent pullback.
Meanwhile the main graph (quarterly Div-adjusted chart for
TLT 20+ Year Treasury Bond ETF) illustrates perhaps right there could the end for U.S. Govt Bond Market decline, with Double top as a further projected/ targeted upside price action.
Will all of that bring U.S. stock market to 50% decline like in early 2000s!?
Time will show!
But more recently, the Federal Reserve's unwavering higher-for-longer rate stance and a deepening bond-market rout have had a sobering effect on equities sentiment, with the S&P 500 index halving its year-to-date gains.
Indeed stock valuations are looking increasingly stretched, raising the risk of a correction.
One such indicator in particular is flashing RED - the relative valuation of stocks versus the debt market.
SPX / ICE BofA Corporate Total Return Index
In August this year, the S&P 500
SPX climbed to levels last seen during the peak of dot-com boom, relative to an index that tracks the US corporate bond market.The gauge is still holding near those highs, despite the recent pullback in equities.
The metric last surged this high in the spring of 2000 — and that was followed by a multi-year meltdown in stocks that saw the S&P 500 crash 50% between March 2000 and October 2002.
SPX 50% Decline During 2000-2002
Another indicator that shows the richness of stocks relative to debt is the so-called equity risk premium — or the extra return on shares over government debt, which is considered a safer form of investment. The metric has plunged this year lows unseen in decades, indicating elevated stock valuations.
"Equity risk premium is near its worst ever level going back to 1927. In the 6 instances this has occurred, the markets saw a major correction & recession/depression - 1929, 1969, 99/00, 07, 18/19, present," research firm MacroEdge said in a recent post on X (ex-Twitter).
The so-called equity risk premium (earnings yield minus bond yield) recently fell to a new cycle low and remains well below historical averages. In other words, the stock market has become more expensive relative to the bond market despite the recent pullback.
Meanwhile the main graph (quarterly Div-adjusted chart for
TLT 20+ Year Treasury Bond ETF) illustrates perhaps right there could the end for U.S. Govt Bond Market decline, with Double top as a further projected/ targeted upside price action.Will all of that bring U.S. stock market to 50% decline like in early 2000s!?
Time will show!
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Oct 16, 2023Equity Risk Premium chart, i.e. S&P500 Earnings Yield minus Federal Reserve Interest Rate.
Values below Zero indicate on U.S. stock marker overvaluation.
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Oct 17, 2023Corporate Bond Premium Chart
ICE BofA AAA US Corporate Index Effective Yield
BAMLC0A1CAAAEY minus USINTR Federal Reserve Interest Rate.The Difference between "AAA" Corporate Bond Effective Yield and Federal Reserve Interest Rate TURNS TO NEGATIVE in 2023, 3rd time over the past 25 years.
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Oct 18, 2023No Wee-wee, Ladies!
No Pee-pee, Gentlemen!
We are the TradingView Community!
We are the Power!!!
11'000 Views. 11'000 persons got the Message!!
💎🙌 Diamond Hands! Hold The Line!
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Oct 19, 2023💡 Some interesting observations on Federal Reserve monetary policy, in connection with
TNX trajectory, over the past 50 years.👉 Over the past 50 years, rate hiking cycles have typically ended, where TNX (10yrs yield) and FF rate
USINTR meet together, check the chart below.👉 But there were several exceptions, specifically in 1970s - early 1980s, where Federal Reserve has been in similar fight against extreme high inflation.
👉 In the same manner Federal Reserve DID NOT STOP monetary policy tightening earlier in Q4'22 where TNX and FF rate meet each other. So.. by this way.. at the end of Q3'23 FF Rate was 5.500% (!), where TNX Rate was 4.570% (!)
👉 Once again, check the chart below to realize how Federal Reserve was doing it's job almost 40-50 years ago (a lot of SWING UP-AND-DOWN FF Rate changes).
👉 It is also important is how the US stock market behaved in both previous noted cases (minus 50% in mid-1970s, and almost minus 30% in early 1980s).
💎🙌 Keep patience, and Hold On.
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Oct 20, 2023TLT, 20+ Year Treasury Bond ETF is at ALL TIME LOW, with total return since inception on July 26, 2002 just as low as 0.29%. If this one is not a support, so what is support at all?
Note
Oct 20, 2023Some Kinda Rush to Reverse, on early Friday T-Bonds Futures Market.
Thanks y'all for Hundreds of Boost and Tens of Thousands Views!
We are the TradingView Community! And We are the Great!!
💎🙌 Diamond Hands! Hold The Line!
Note
Oct 20, 2023EAST OR WEST,
SAFETY CASH - IS THE BEST
© Pandorra 😎
Once again, thanks y'all for awesome support and insight!
Have a nice Weekend!
💎🙌 Keep patience, and Hold On!
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Oct 22, 2023Long Term Real (inflation-adjusted) T-Bond Rates are at the highest XXI century peaks. Topped 2.500% level last week - the biggest value since October, 2008.
Note
Oct 23, 2023Everybody in the House..!?
Say Yeah Yeah, Yeah Yeah 👍
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17-11-2023One Month Later...
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Dec 1, 2023HERE WE GO
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Dec 6, 2023TLT JUST HIT 3-Month HIGH. OUR SUPERIORITY IS UNDENIABLE
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Dec 14, 2023US Govt 10Yrs Treasuries Yield is back below 4.00% , first time since July, 2023.
Lets Make
TLT Stock Price Triple Digit Again. Trade active
Dec 22, 2023👌 Dressed To The Nines.
👉 This is a well-know idiom in everyday life, that is sometimes equally true for financial markets also.
👉
TLT ETF gains for 9 (NINE) consecutive weeks in a row, since the idea was published in the middle of October, 2023.👉 Nine-weeks gains, that is the longest upside stripe over the all 20+ Yrs history of
TLT ETF. Trade active
Dec 27, 2023 🎆🎇🎆 Finally, 100+
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August 2, 2024TRADING ACTIVE
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