Brian Reynolds and I were just discussing the true meaning of the 10-year note yield. Some continue to think the historically low yield suggests economic risk going forward. Brian and I agree that if that were the case, the corporate market would not have rallied as it has.
We also agree the risk surrounds the structural dynamic that is taking place. The risk in equities surrounds how the panic-buying in treasuries is unwound. The longer the panic-buying takes place, the nastier the unwinding process could be.
Just another reason in my view to be defensive near-term. Defensive does NOT mean short -- it simply means staying out of the way for a bit.
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