Will it be different this time?

[sakowitzm]

(I hope the attachment comes through.)
(The attachment compares the 10-year Treasury rate with the S&P 500.)

From the beginning of 1973 through most of 1974 there was a pretty clear inverse relationship between the 10-year and the S&P 500. And again, same thing from beginning of 1981 through mid-1982. As interest rates rose the market fell.

This time, they've both generally climbed together. Would it not break the laws of physics if the market didn't turn south in a major way...soon? Or will it be different this time? (Hint: It's never different this time.)

 

[LateToFIRE]

I dunno where the market is headed over the next year or two. And I'm not much of a chartist. What I do know is that one would be well-advised to design a retirement plan where it does not much matter.

 

[Montecfo]

It already fell...see 2022. Nasdaq was down 33%. Dow and S& P both down 20% peak to trough in light of the new direction of interest rates.

Stocks began to rally when the market could project a top in interest rates. This happened last October and we rallied since then.

Now this current mini spike in Treasury rates was not anticipated and appears to be driving the equity market down further. That all makes sense.

The market discounts future events.

 

[CDRE]

Take a look at this thread that was initiated and updated by Lsbcal: How does this decline compare to previous recessionary ones.

 

[Exchme]

Here are inflation adjusted returns for the S&P and the 10 year going back to 1926. It's a semi-log chart so 3/10 of the distance between any two horizontal lines is a wicked 50% drop.

I'm not sure what OP thinks can be seen in the data, but I don't think I see it.

I do not believe that I have any special ability to see what's next with enough accuracy to beat everyone else on a consistent basis. So I don't try, I hold my asset allocation. (If I did believe in easy cause and effect and ability to use a simple chart to predict the future, I would note that after the two big historical drops in the 10 year, from 1946-1948 and 1978-1981, a year or so after bonds stabilized, stocks took off.)

 

[SnowballCamper]

I'm just waiting for the 15% 30-year bond to come back. Then I'll go for it.

 

[pb4uski]

It already fell...see 2022. Nasdaq was down 33%. Dow and S& P both down 20% peak to trough of the new direction of interest rates.

Stocks began to rally when the market could project a top in interest rates. This happened last October and we rallied since then.

Now this current mini spike in Treasury rates was not anticipated and appears to be driving the equity market down further. That all makes sense.

The market discounts future events.

Doesn't look that way to me. It looks to me like over the past 2 years that the 10-year Treasury has a definite upward slope and that the S&P 500 has been wandering around but not down as much as it probably should be.

It was inverse through about Oct 2022, then from Oct 2022 to Aug 2023 the market rose as the 10-year bounced around fairly level and then since Aug 2023 the inverse pattern has repeated.

 

[Montecfo]

Doesn't look that way to me. It looks to me like over the past 2 years that the 10-year Treasury has a definite upward slope and that the S&P 500 has been wandering around but not down as much as it probably should be.



It was inverse through about Oct 2022, then from Oct 2022 to Aug 2023 the market rose as the 10-year bounced around fairly level and then since Aug 2023 the inverse pattern has repeated.

And? What do you disagree with? Can't tell from your response.

Perhaps you misunderstood me. I did not say equities bottomed after interest rates topped. I said that happened after the market *could project* a top in rates.

The market protection was a little off as far as timing, which is why we have not exceeded the highs of December 31, 2021.

Yet.

 

[DrRoy]

I'm just waiting for the 15% 30-year bond to come back. Then I'll go for it.

It would probably take 15% inflation and then you would just be breaking even.

 

[Fermion]

It would probably take 15% inflation and then you would just be breaking even.

I have experienced hyper inflation in building materials during Covid and that was eye opening. I can't even imagine living through that in everyday goods.

I know 15% inflation is not the 50% to 200% we had in building materials but it still sounds pretty bad.

 

[FiveDriver]

I wonder if there's a chart that compares the 10 year bond to the S&P 493 ?

The Magnificent 7 have put up big gains. The rest of the herd....not so much.

 

[Fermion]

How much of the S&P line is survivor bias? What I mean is, if Microsoft were to go bankrupt and be dropped from the 500, would it be reflected in the chart? I think so, but unsure exactly how it works when companies are added and dropped.

 

[DrRoy]

I have experienced hyper inflation in building materials during Covid and that was eye opening. I can't even imagine living through that in everyday goods.

I know 15% inflation is not the 50% to 200% we had in building materials but it still sounds pretty bad.

From 1973 to 1981 gasoline went up about 4X due to two OPEC embargos. That was quite a shock.

 

[G-Man]

Do you think Bonds will recover and have an up year in 2024? This is a chart for PINCX. Seems like after a down year, you historically have an up year.

 

[target2019]

Had to look up PINCX. VBMFX is what I think of when it comes to bond fund. I don't see either fund ending positive this year. YMMV.

 

[G-Man]

Had to look up PINCX. VBMFX is what I think of when it comes to bond fund. I don't see either fund ending positive this year. YMMV.

Looking at the historical pattern, it seems it is due for an upturn at some point. Not sure when.

 

[Montecfo]

Do you think Bonds will recover and have an up year in 2024? This is a chart for PINCX. Seems like after a down year, you historically have an up year.

Bonds have had two down years in a row and heading for 3.

But yes I think next year should be better.

 

[G-Man]

Bonds have had two down years in a row and heading for 3.

But yes I think next year should be better.

3 down years for bonds. That is historical right? Never has happened before based on my observations.

 

[Montecfo]

3 down years for bonds. That is historical right? Never has happened before based on my observations.

I believe that is correct.

 

[target2019]

Then we have proof. This time is different.

Wait, it happened twice in the 1950's. https://g.co/bard/share/b9f013c7fbec

 

[Montecfo]

Then we have proof. This time is different.

Wait, it happened twice in the 1950's. https://g.co/bard/share/b9f013c7fbec

So it IS historical!

Not in my lifetime.

 

[target2019]

So it IS historical!

Not in my lifetime.

Yes, everything that happens is historical.


In the 1950's I was busy with my first bike, and wondering about Santa Claus.

 

[freedom2022]

It is different this time

Interest rate was around zero more than one decade.
It was unprecedented.

It is different this time.
No economist can figure what will happen.
We'll see how it will pan out.

 

[Bdarr]

Interest rates are like gravity is to a apple…if you depend on returns to fund your retirement having some in short term bonds makes a lot of sense…the 60-40 didn't do well because of bond rates rising recently…It is wise to have 1-3 years in cash and short term bonds and by cash I mean money markets paying at least 4%. If you are saving for retirement just keep buying and in the long run you will win…by long run I mean 10-20. yrs. Risk has it's rewards if one is wise and has time.