Stocks Soar While Bonds Are Signaling Gloom. What's Up?

Ted

FYI: Why is the stock market so happy and the bond market so gloomy?

Just as the S&P 500 was setting a record high Thursday, bond yields were tumbling to their lowest levels since Donald Trump was elected. The yield on the 10-year Treasury, which influences rates for mortgages and other loans, dropped below 2% at one point. It was above 3.20% in November.

Usually, stock prices rise when investors are feeling confident. Bond yields, meanwhile, often fall when investors are worried about a softening economy. How can both be happening at the same time? In large part, it's because investors are locking in bets based on expectations for what the Federal Reserve will do with interest rates. The U.S.-China trade war is also playing a role. Here's a look at how ebullience and trepidation can occur simultaneously:
Regards,
Ted
https://lmtribune.com/nation/q-a-stocks-soar-while-bonds-are-signaling-gloom-what/article_f68ddac4-296e-5ef0-adb9-bdffa9ad0dbe.html

hank

I’ve been wondering the same thing. Something doesn’t seem right with a great many investors “giddy” at having achieved double-digit gains in most risk assets (junk bonds, EM bonds, equities, gold, REITS) half-way through the year (and continuing to push those markets higher) while, at the same time, many others are piling headlong into a vehicle that promises 2% annually.

Please don’t give me the old “Song & Dance” about how Treasuries offer capital appreciation. That’s only true if interest rates move even lower and, in any case, doesn’t address the fundamental question of why Treasury bonds and most other risk assets are moving at flank speed in diametrically opposed directions.