Stocks And Bonds Break Apart
- Posted by JC Parets
- on August 27th, 2013
A funny thing happened on Monday afternoon. As stocks rolled over into the close, US Treasury Bonds didn’t follow. This is now something different, a change in character for these markets. Last Friday we ran the numbers: Stocks and Bonds ($SPY & $TLT) had a 1-week positive correlation of +0.95, a 2-week correlation of +0.94 and a 1-month +0.79. The results showed a very high positive correlation between the two asset classes. Interest rates rising was bad for stocks and bonds. But no more.
I was pretty vocal on Stocktwits Monday about this shift in market behavior. But since this has now continued into Tuesday, I think it’s worth a quick blog post. Lower rates are now negative for stocks.
Here is a 10-minute chart showing the close relationship between the two asset classes. They came apart around 2 o’clock Monday:
With stocks selling off, it seems as though the market is looking for the safety of US Treasury Bonds. Safety appears to be the priority, not the fear of higher rates. This is an interesting development.
I’ll follow up as this behavior continues. I think this is just the beginning of the return of negative correlations.
Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.blog comments powered by Disqus
J.C. Parets is the Founder & President of Eagle Bay Capital, LLC. He is a 10-year veteran and Market Technician who actively manages money incorporating Technical Analysis and Behavioral Finance into his practice. JC’s work has been featured regularly on CNBC, Fox Business, Bloomberg, Business News Network, Wall Street Journal and Yahoo Finance among many other financial media outlets. More...
- Turkey Is Ready To Get Cooked
- A Look At Coffee From The Top/Down
- It’s The Yen, Stupid!
- Here’s Why Energy Will Outperform Going Forward
- The Problem Now Is The Overhead Supply
- This Bullish Base In Cotton Is Almost Complete
- Is This Why The S&P500 Stopped Going Up?
- How Low Is Apple Going To Go?
- The Dow Jones Industrial Average And Its 200 Day Moving Average
- It’s Almost Time To Buy Crude Oil Again
Archive by Year