From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley
Benchmark yields have moved in a vertical line higher since the beginning of March. This isn’t just the case in the US; we’re seeing similar action all across the globe.
But as rates rally higher and higher, more and more classic intermarket relationships are failing to confirm the move.
Yes, commodities and commodity-related stocks remain resilient, and bonds are an absolute dumpster fire.
Most other assets we would expect to do well in a rising rate environment simply aren’t. This is especially true for the banks!
Meanwhile, those groups that we’d expect to underperform in this kind of environment, such as utilities and other defensive stocks, are actually outperforming.
All of this speaks to risk-aversion, not risk-seeking behavior.
Let’s take a look at some of our favorite intermarket ratios and put these bearish divergences into perspective.