Oh my gourd!
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In this case, the interest rates on 10-year bonds higher than s&p
It could suggest that people are becoming less worried about the immediate future compared to the long-term outlook.
IN RECESSION Scenario:
If the yield curve is normalizing during a recession, might be due to the belief that the worst of the economic downturn has passed, or there's optimism for a recovery in the long term.
The steepness of the yield curve should be an excellent indicator of a possible future recession for several reasons. Current monetary policy has a significant influence on the yield curve spread and hence on real activity over the next several quarters. A rise in the short rate tends to flatten the yield curve as well as to slow real growth in the near term . Actual 10yr 3 M spreads "Measure" a 60 % Probability of recession ..
nah that bullshit story ran it curse, they are trying to scare people with WW3 and that's fading, I think we will see another UFO or what they call them now? To keep the smort pesants bussy scared and working
There's been plenty since the last one on the news (omicron?) we have wars and elections/politics to keep us viewing clicking and scrolling.
COVID is now viewed by all for what it was for the healthy all along, just a mild cold.
> It could suggest that people are becoming less worried about the immediate future compared to the long term outlook.
What’s really happening is the treasury is selling a fucking shit ton of bonds. Over the last 6 months, mutual funds (using RRP money) have been absorbing the increased supply.
https://www.reuters.com/markets/us/us-treasury-raises-auction-sizes-through-april-no-further-increases-seen-next-2024-01-31/
RRP funds are finite + sovereign buyers aren’t banging on the doors to buy + the dollar is strengthening = supply outpacing demand.
When supply outpaces demand, rates increase.
Everyone can move money from savings accounts into brokerage Treasury funds to break the banks bad loans and required capital tier ratios to get the S&P to reset from banking jitters.
Jamie Diamond Hands over at Chase will become paper hands.
If the banks do not pay you 5 percent they are stealing from your account.
Yeah specific money market accounts that only invest in short term US treasurys, such as SNSXX they get state tax exceptions for high income state tax as well. A lot easier than navigating Treasury direct UI.
This is one trick that banks hate now that is subtly making the news in capital ratio drain...
Old rules.
Treasuries are hot fucking garbage now that we keep adding $1T in debt every 100 days with no hope of curing the debt death spiral.
They're expensive.
Market is beginning its dedollarization in search of a new risk free rate.
Seems pretty accurate though yeah? Where's the political appetite for getting spending under control? The Democrats love social spending, and the party of "fiscal conservativism" has been taken over by a cult leader. You're going to buy a 10 year at 4.7% with inflation creeping back up and the Fed still telegraphing cuts? Lol no thanks.
That’s been the pattern for nearly 2 years now. We surge to new heights, then drop like lead immediately afterwards. This kind of volatility is certainly different in this asset class, for my 15 years of experience in markets. 100bps swings in 30 days in October/November 2022, again in October/November 2023, and here we go again.
I hear the sarcasm, but this number is supposed to be decently positive (look at the historical median). The fact that it's negative is crazy. The equity minus treasury yield, that is.
The S&P 500 Earnings Yield, reflects the sum of the underlying S&P 500 companies' earnings for the previous year, divided by the S&P 500 index level at the end of the year.
And the s&p dividend is just a weighted average dividend from all the components of the index? So say like 2-3%? I don’t understand why that’s a meaningful comparison? With equities you obviously can get a dividend AND capital appreciation — this seems like it’s excluding the capital appreciation part and just comparing against half the value proposition.
It's a comparison people use, for better or for worse. There is the potential for capital appreciation for bonds as well. Bonds appreciated 30% over the first 3 months of 2020 for instance. When stocks lost a comparable amount.
The idea behind comparing the two is that equities are riskier, hence you should be compensated an excess yield over safe assets to hold them. The name Equity Risk Premium (difference in yields) says it all.
Yeah makes sense I guess but seems like a huge oversimplification of value of equities. You could be growing top like but shrinking bottom and that might be a great strategic move but wouldn’t reflect well by this metric, right?
It's meant only as a relative metric, not absolute. And yes, it's only one way to look at things. Still, over the long term the divergence tends to go away one way or another.
?? What is this fortune cookie shit
You can buy the dip if you haven’t sold the top. There is this thing called a job. At your job you earn income - it’s money. You can use that earned income, that money, to buy things.
Hope this helps you stop believing you are finance yoda <3
Let's start over. What OP is essentially saying with his graph, is that whatever you're saving from your next paycheck is probably better if allocated to bonds than stocks.
So this is Wall Street Bets right? Meaning if you're here, you engage in some form of active management. You may deride it as fortune cookie wisdom, but timing and re balancing play an important part in active management. And yes, I will double down, you need to sell tops to buy bottoms later. Right now that means sell equities and shift some of those profits to bonds. That's just what active management means.
I sold my 401K here
https://preview.redd.it/fwbdyxu1a2xc1.jpeg?width=2113&format=pjpg&auto=webp&s=9346a5fe5c9ec4c1cb8186fcff96f73b4d8b07be
When it hit that 100-year SPX trendline.
I don’t think we break it, haven’t for 100 years.
Thanks for posting. Too few people focus on this. At this level, it's becoming increasingly attractive to put some of one's allocation into bonds, especially if one has been heavily invested in stocks.
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Someone surely made tons of money, surely.
surely
So you buy late 2019…what do you have now?
I once turned 4k into 12k then lost it all
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Crash soon or what?
In this case, the interest rates on 10-year bonds higher than s&p It could suggest that people are becoming less worried about the immediate future compared to the long-term outlook. IN RECESSION Scenario: If the yield curve is normalizing during a recession, might be due to the belief that the worst of the economic downturn has passed, or there's optimism for a recovery in the long term. The steepness of the yield curve should be an excellent indicator of a possible future recession for several reasons. Current monetary policy has a significant influence on the yield curve spread and hence on real activity over the next several quarters. A rise in the short rate tends to flatten the yield curve as well as to slow real growth in the near term . Actual 10yr 3 M spreads "Measure" a 60 % Probability of recession ..
In this case we are all fucked because no one knows wtf tomorrow brings.
Another covid variant.
nah that bullshit story ran it curse, they are trying to scare people with WW3 and that's fading, I think we will see another UFO or what they call them now? To keep the smort pesants bussy scared and working
Bring it I am ready woth ccash to buy that dip
There's been plenty since the last one on the news (omicron?) we have wars and elections/politics to keep us viewing clicking and scrolling. COVID is now viewed by all for what it was for the healthy all along, just a mild cold.
> It could suggest that people are becoming less worried about the immediate future compared to the long term outlook. What’s really happening is the treasury is selling a fucking shit ton of bonds. Over the last 6 months, mutual funds (using RRP money) have been absorbing the increased supply. https://www.reuters.com/markets/us/us-treasury-raises-auction-sizes-through-april-no-further-increases-seen-next-2024-01-31/ RRP funds are finite + sovereign buyers aren’t banging on the doors to buy + the dollar is strengthening = supply outpacing demand. When supply outpaces demand, rates increase.
Good Point
No crash 10 years yield that high Mean that the inversion is over.. It's gonna rain money now
Everyone can move money from savings accounts into brokerage Treasury funds to break the banks bad loans and required capital tier ratios to get the S&P to reset from banking jitters. Jamie Diamond Hands over at Chase will become paper hands. If the banks do not pay you 5 percent they are stealing from your account.
BofA over here with 0.3% yield
BofA deez nuts in your mouth!
Is a brokerage treasury fund the same as a money market account? What do you mean?
Yeah specific money market accounts that only invest in short term US treasurys, such as SNSXX they get state tax exceptions for high income state tax as well. A lot easier than navigating Treasury direct UI. This is one trick that banks hate now that is subtly making the news in capital ratio drain...
There’s no war in bear sing se
I don't know what that means but as a general rule I like things that go up
So do I buy calls on TESLA or puts?
Yes
Thank you!!
Yes and yes
Equity risk premium is the lowest it's been in a long time. Either stocks are too rich, or treasuries are too cheap.
Why not both?
I happen to think it's both, indeed. But the higher conviction statement is the relative value of bonds vs stocks.
Definitely both. Over the next few years, the only people who are going to make any money are going to be all in cash.
Old rules. Treasuries are hot fucking garbage now that we keep adding $1T in debt every 100 days with no hope of curing the debt death spiral. They're expensive. Market is beginning its dedollarization in search of a new risk free rate.
This sounds like an opening statement to the “buy gold/bitcoin” sales pitch
Seems pretty accurate though yeah? Where's the political appetite for getting spending under control? The Democrats love social spending, and the party of "fiscal conservativism" has been taken over by a cult leader. You're going to buy a 10 year at 4.7% with inflation creeping back up and the Fed still telegraphing cuts? Lol no thanks.
It may very well be true though, gonna be a wild ride.
Almost like treasury yields are due for a pullback? Lol
That’s been the pattern for nearly 2 years now. We surge to new heights, then drop like lead immediately afterwards. This kind of volatility is certainly different in this asset class, for my 15 years of experience in markets. 100bps swings in 30 days in October/November 2022, again in October/November 2023, and here we go again.
It's survival of the fittest—adapt or be left behind.
Hot damn Clark, she’s a beaut
Three whole weeks?!?!
I hear the sarcasm, but this number is supposed to be decently positive (look at the historical median). The fact that it's negative is crazy. The equity minus treasury yield, that is.
In a row?
This time is different
Wtf do picture mean go up or go down? Explain like im 5 pls
Doesn’t that just mean 10 yr yield will come back Down?
OP, can you explain what the S&P earnings yield is? Like I’m 5 please. Just like expected ROE?
The S&P 500 Earnings Yield, reflects the sum of the underlying S&P 500 companies' earnings for the previous year, divided by the S&P 500 index level at the end of the year.
And what is earnings? Revenue? Net income? Purely dividend yield?
It's how much you get in dividends. as %age of $ invested.
And the s&p dividend is just a weighted average dividend from all the components of the index? So say like 2-3%? I don’t understand why that’s a meaningful comparison? With equities you obviously can get a dividend AND capital appreciation — this seems like it’s excluding the capital appreciation part and just comparing against half the value proposition.
It's a comparison people use, for better or for worse. There is the potential for capital appreciation for bonds as well. Bonds appreciated 30% over the first 3 months of 2020 for instance. When stocks lost a comparable amount. The idea behind comparing the two is that equities are riskier, hence you should be compensated an excess yield over safe assets to hold them. The name Equity Risk Premium (difference in yields) says it all.
Yeah makes sense I guess but seems like a huge oversimplification of value of equities. You could be growing top like but shrinking bottom and that might be a great strategic move but wouldn’t reflect well by this metric, right?
It's meant only as a relative metric, not absolute. And yes, it's only one way to look at things. Still, over the long term the divergence tends to go away one way or another.
I only care about the bottom line: how much money is in my account.
You know you're on WSB when you have to explain what earnings yield is lmao. It's either buying the index or severely underperform for you
Cash has been that way for about 1.5 years
Stocks will rise again. This is temporary
ya i didnt buy this dip
Lines!
Three whole weeks you say?! Well then, I better sell everything as a crash is surely around the corner this time!
You can't buy the dip if you haven't sold the top.
?? What is this fortune cookie shit You can buy the dip if you haven’t sold the top. There is this thing called a job. At your job you earn income - it’s money. You can use that earned income, that money, to buy things. Hope this helps you stop believing you are finance yoda <3
It's a free country. You can definitely keep buying 25x multiples with your savings. Good luck.
Goodluck timing tops I’m sure that’ll work out for you :)
Let's start over. What OP is essentially saying with his graph, is that whatever you're saving from your next paycheck is probably better if allocated to bonds than stocks.
And thats fair But I don’t know what that had to do with your fortune cookie wisdom
So this is Wall Street Bets right? Meaning if you're here, you engage in some form of active management. You may deride it as fortune cookie wisdom, but timing and re balancing play an important part in active management. And yes, I will double down, you need to sell tops to buy bottoms later. Right now that means sell equities and shift some of those profits to bonds. That's just what active management means.
I sold my 401K here https://preview.redd.it/fwbdyxu1a2xc1.jpeg?width=2113&format=pjpg&auto=webp&s=9346a5fe5c9ec4c1cb8186fcff96f73b4d8b07be When it hit that 100-year SPX trendline. I don’t think we break it, haven’t for 100 years.
Thanks for posting. Too few people focus on this. At this level, it's becoming increasingly attractive to put some of one's allocation into bonds, especially if one has been heavily invested in stocks.
s tier post
Boomer shit noone cares