If the breakout in Treasury yields turns out to be a head fake, it won’t give much help at all to the stock market. Yields have risen in such a dramatic way over the past 5-6 months, that a pullback (to something like 4.1%) will still leave them near their highest levels in 16 years.
Our call in July…warning that the yield curve was likely going to steepen…seems to be playing out. However, as we highlighted back then, this is actually a bearish development for the stock market, not a bullish one.
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