What a rush … !

After a very pleasing November, a good observation to have right now is: the yield curve is still inverted (10Y-2Y). And it's probably going to uninvert, because it generally doesn't stay that way forever. So in 2000, and in 2007, what happened to ST and LT bond values respectively when it uninverted? Which did better?

The short answer is, BOTH 10 and 2 year bond yields fell. The 2 year yields fell more, but because prices are more sensitive for longer maturities, you likely made more money if you were holding 10 years. They started falling before the SPX picked up on a crash. Do falling bond yields "cause" a market crash? It's unclear what sort of thinker that would make sense to. A better way of thinking is that they predict that equities are more at risk of a drawdown, in advance, than equity bidders believed they had been. Further, that equity indexes can be projected to fall in association with recessionary periods, of which previously high interest rates can be a cause, and the treatment for which is lower market rates. (The Fed can be expected to follow, though not in response to equity investors, but in response to some other systemic problem).

None of that means that equity indices can't go higher. In fact, they easily could, given the strong directionality of movement recently. If the SPX can break out just a few points higher past 4607 top, then odds are pretty good of a year-end runup. The next few days ... no less than the last few .. will tell us a lot ....

... and guess what election year Januaries usually look like .... https://financial-charts.effingapp.com/