I’ve lost track on when the bond market was supposed to implode, but it’s been a universal theme almost every year and has failed to materialize. This year, however, it seemed like a done deal as the nation would be flushed with stimulus cash and the Fed would hike rates no less than three times. It appeared to be happening, then the wheels came off healthcare reform, and investors flocked into taxable bonds eschewing domestic equities.
The week it became clear the Republican healthcare bill was in trouble, individual investors dumped $6.8 in domestic equities while buying $12.5 billion in taxable bonds.
So, now bonds are attractive again as several unknowns haunt the market.
I continue to see the recent shift into bonds as a cautionary move rather than an indictment of the economy, although the Trump administration is going to have to get real creative, and perhaps even unorthodox, to get portions of the economic agenda through.
That said, the 10-year yield is breaking below key support and that will cast a shadow over equities.
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