There’s a big story unfolding in the bond market that could shake things up for equities.
As 10-year Treasury yields continue their march higher, the pressure on growth is intensifying, and that’s something the market hasn’t fully reckoned with yet.
Amid the current market euphoria, here’s the reality…
Rising yields mean higher costs for financing, refinancing and just about any form of debt restructuring. And if we keep seeing this upward trend, it’s going to choke off growth at every level.
When yields are high, companies start pulling back on investments, consumers slow down on spending, and suddenly, all that fuel for stock market gains starts drying up.
The ripple effect of rising yields isn’t just theoretical — it’s already showing up in the housing market. For anyone out there looking to buy a house, myself included, the thought of closing a mortgage at 6.5% or higher isn’t exactly attractive.
High yields aren’t just squeezing individual buyers — they’re cutting across every type of financing. And when borrowing costs get too steep, the stock market will have no choice but to take notice and adjust.
Right now, we’re seeing all-time highs in equities, but I wouldn’t be surprised if this changes soon. The bond market is full of sophisticated investors, and the way yields are rising suggests there’s serious concern about growth sustainability.
The 10-year yield keeps climbing even as the Fed aims to cut rates — a sign that inflation is still in play and investors are demanding a premium for holding longer-term bonds.
If yields continue pushing upward and we finally break free from the 10- and 2-year yield curve inversion, it could be a signal that equities need to cool off. A reversion of this yield curve could have major repercussions for stocks, as it traditionally signals a tightening squeeze on economic growth.
I’m not saying the sky is falling, but there’s too much pressure building in bonds right now to ignore.
Yields are sending a message, and it’s only a matter of time before the market responds. That’s why I’m keeping an eye on small hedges and holding off on taking big new positions. If this pressure keeps building, it’s going to hit the equities market hard — maybe not today or tomorrow, but it will eventually.
For now, I’m staying cautiously optimistic, but I’m ready to make moves if bond yields keep rising.
If you want to see what I’ve done so far to hedge myself, check out my “Final Hour” session from Wednesday, right after the 35-minute mark!
I’ll see you in the markets.
Chris Pulver
Chris Pulver Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
P.S. We’re Not Done With Inflation Yet. In Fact, a Second Wave Is Coming
We’re standing on the brink of an economic storm unlike anything since the wild, inflationary ’70s.
Not just a ripple, but a massive tidal wave of inflation is heading our way — and it doesn’t care who sits in the White House come November.
With nearly 30 years of experience trading stocks, options, futures, forex and cryptos, and more than 10,000 hours spent trading and teaching…
I know a thing or two… But this is different.
It’s bigger, it’s badder, and if 2020 taught us anything, it’s that we can’t afford to sit on our hands.
Inflation’s coming back with a vengeance, possibly hitting double digits again.
Meanwhile, the price of literally everything has gone up in the last few years…
And now, many Americans can barely afford to save any money at all.
But Here’s Where Things Get Interesting
The profits and performance shown are not typical, we make no future earnings claims and you may lose money. The results shown are from an 11 year backtest on 550 trades. The result was a 97.1% win rate, 17% average return (winners and losers) with an average hold time of 11 days.
