How Stocks Do Depends On Bonds & Yen!
Let's of course play devil's advocate here, as we always do. What's the other side of the argument? I would say that Yen and Bonds are near important lows, rather than about to begin a new leg lower. The other argument is that the correlations change. While I'm comfortable erring on the side of correlations staying consistent here, it's be lack of a breakdown that would present a problem for equities in my opinion. Let's just say that if these two assets don't break down, and instead squeeze higher. I would bet stocks get crushed in that scenario.
So I'm open to all possibilities. I continue to be in the camp that stocks go higher and these two break down accordingly. That would be a friendly environment to stockholders. But we'll be watching and reacting to either outcome.
- JC