Authored by Jesse Felder via TheFelderReport.com,
There’s a rising disconnect between the costs of shares and bonds.
“It appears bonds are adjusting to a post-QE world however for some motive equities have not. In case you had advised me that charges had been gonna be the place the at the moment are on Jan. 1 and earnings can be flat and the S&P can be up 12-13%, that is not a part of my course of.” https://t.co/IkAAQkkgBK
— Jesse Felder (@jessefelder) November 1, 2023
Bonds have begun to replicate the truth of a “post-QE world” whereas shares have but to take action.
“The historic relationship between bond yields and the S&P 500 P/E a number of means that the latest disconnect may be corrected in one in all two methods — both the fairness market has additional draw back or yields will transfer decrease.” https://t.co/AKvLOrUJ1x pic.twitter.com/5kELvTpJn0
— Jesse Felder (@jessefelder) October 31, 2023
Furthermore, the rising “liquidity gap” suggests bonds might not but be performed pricing it in.
‘If the T-bill charge stays at 5% or increased, to get a threat premium in bonds you want a bond yield of 5.5% or increased. And given the liquidity gap, demand might want to come from personal sector buyers, who would require a threat premium relative to money.’ https://t.co/PtBw3eW5AX
— Jesse Felder (@jessefelder) October 31, 2023
In the meantime, the message being despatched by the yield curve will not be, by any means, bullish for the broad inventory market.
‘The arrows within the graph beneath present the events the place the unfold between the 3-month T-Invoice yield and the 10-year T-Bond yield was inverted, and it both grew to become un-inverted, or the slope of the curve steepened by no less than 100 foundation factors.’ https://t.co/0T80AgQKTL pic.twitter.com/zi9kHKOBNO
— Jesse Felder (@jessefelder) October 30, 2023
And the ahead steerage out of the company sector apparently confirms this view.
‘At simply over the half-way mark of the reporting interval, “weak demand” is among the many high trending phrases on earnings calls. If the tempo of mentions holds for the following few weeks, it could be essentially the most on file, in line with knowledge going again to 2000.’ https://t.co/3jQDCthcH4 pic.twitter.com/sg3a6hVxrj
— Jesse Felder (@jessefelder) November 3, 2023
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