FOR A FLEETING TIME TUESDAY AFTERNOON, the stars in the stock market were aligned in a configuration not seen in a half-century: shares yielded more than bonds.
Specifically, the dividend yield on the Standard & Poor's 500 stock index touched 3.57% at 1:13 PM Eastern time, exceeding the 3.54% yield on the benchmark Treasury 10-year note, according to Bloomberg News. That's something that hadn't happened since 1958.
This is a big reason why I think the market is bottoming right now.
2 comments:
Sorry folks, but the reason that shares "yield" more than bonds right now is that bonds MUST pay their yields -- share NEED NOT PAY ANYTHING.
If we think that the stated dividend rates that add up to that 3.57% are going to remain unchanged over the course of the coming 12 months, then We have a bridge to sell us.
Further, I believe that this low interest rate period is the trough before the spike (the reverse of what happened in the 1930s). The coming deluge of treasuries will flood lenders who will go from (now) worrying about not getting their principle back due to default to (then) worrying about not getting their principle back due to inflation (it's coming -- trust me).
Yesterday the S&P chart put in a beautiful hammer -- and then opened down today and is falling. Without a rally this afternoon (not impossible) the consolidation story goes out the window.
Gotta go -- some folks are on the other line trying to get their money out of my hedge fund.
Bondad, can you say/explain more about this please? Trying to figure out whether is a disaster or an opportunity. Thanks
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