Rates Becoming a Problem for Stocks
Over the years, we have relied mostly on 'boutique research' and our own research, instincts and methodology. (One of the firms' research that we use, as you have seen, is Ned Davis Research.) They graciously allow us to share some of their research with you. Two charts on their site caught my eye yesterday that are UBER BEARISH for stocks. Again, not advising anyone to sell anything, just what I see with my two eyes.
Links to the charts are below. The NDR Bond Benchmark Model and their T Bills/SPX yields charges are in serious danger territory. It explains why we have been calling for 1) a fall in bonds and 2)a drop in stocks that follows. NDR says that 4.90% in 10's is the tipping point. Well, we are almost there my friends.
Note that this is in direct contrast to many 'strategists' that I hear on Bloomberg Radio, etc. who say 'stocks are cheap compared to bonds.' They take their guess on 2006 or 2007 P/E ratio, invert it to get an earnings 'yield' and then compare it to the 10 year note. I hate to say I find that to be a foolish way to invest other people's money. We continue to be defensive across the board and can't wait to get bullish - honestly - but only when I get the fat pitch to hit. In either bonds (late April - early May) and stocks (October?). Just educated guesses and not advice.
S&P 500 Stock and Total Return Indexes
S&P 500 Stock Index
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