Huh?
Death spirals in US bond markets have not often lead to sustainable rallies in US stocks.
It was an “interesting” quarter…swapping bonds into stocks would have benefitted US investors handsomely.Selling bonds was obvious and saved 4-9% but I missed the buy stocks side of this allocation as I still have a blind spot to US equities.
10-30 yr T-bonds are down 4-9%, stocks shot up 8% this quarter so far and I think they now look very vulnerable, Gold is up 5%. Dollar index was volatile but is little changed. QE2 took it down, further Euro crisis took it up.
Clearly, I don’t get it.
Was the stock market illiquid enough that the sell-off in Treasury bonds forced an 8% run as individual investors ran into stocks?
Since they will not be raising taxes, deficits will remain high and government will be forced to shrink spending dramatically?
The dollar will fall eventually out of fiscal concerns (if/when Europe calms down) and exporters will benefit from a lower dollar?
Seems a little wishful to me. We will see how this hand plays out as the stimulus package winds down. Not a lot of economic bang for the $1.6 Trillion spent to prop up banks. I still see 9.8% unemployment and pretty slow growth.
Careful,
Leon
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