Stocks have a long way to go to resolve the divergence with the bond market…even if yields pullback near-term.
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Feb 22, 2023
Matt Maley
Total 301 Posts
The S&P is oversold short-term, but it’s not even remotely oversold on an intermediate-term basis…and the divergence between the bond & stock market is still a VERY large one. Thus, any mild decline in bond yields is not going to help the stock market for very long.
In our July pieces, we showed how whenever an inverted yield curve moved back into positive territory over the past 50 years, it was actually a very BAD time for the stock market.
The stock market is getting somewhat oversold, but it still has further to go before it reaches the kind of level we’ve seen at important lows of the past five years. So, although it could see very short-term bounces at any time, we think the stock market has further to fall.
The most important issue facing the markets is the divergence between the bond & stock markets. History tells us it will be resolved with a decline in stocks.