Long term yields are starting to move higher. Technicals have confirmed a downtrend in Price, possibly a 75 to 100 bp back up in long term yields. Either the mkt is sniffing inflation ( possibly) and/or foregn buyers of US debt paper are not as interested. This weeks bond auctions were not well received.
The stock/bond model still suggests stocks should outperform bonds. Not entirely true as the writedowns in the financial sector are not included in estimated SP500 earnings. Bonds are expensive given the inflation picture, stocks are still expensive, but just not as expensive.
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