Steady as she goes. Yesterday wasn’t a runaway session, but all major equity indices that served as proxies for the overall market increased. Health Care (XLV) led the way in the S&P 500 while Energy (XLE) lagged. 

All eyes were on major indices; the “Fear Index,” aka the Volatility Index (VIX), stole the show as the VIX slipped to 12.43.

The Only Thing to Fear

With the VIX changing hands below 13.0, the Fear & Greed Index remained in ‘extreme greed’ for the fourth consecutive session.   

Bond yields tumbled, and the ten-year bond yield at 3.78% is well below its 200-day moving average.

Lucky Number Seven?

The Street is now modeling for seven rate cuts. This seems bullish because it opens the market’s love for accommodation.

But this might get out of hand in a way that suggests a sloppy economy and maybe a recession.  Moreover, there is now an 18.0% chance of a rate cut in January. That would be an emergency rate cut.

Today’s Session

For all the talk of stock market euphoria, the impetus for the moves in equities has been the moves in bond yields.  Maybe, the concern over the parabolic move in stocks should be focused on the precipitous swoon in bond yields.

Remember, the bond market is supposed to be level-headed.  It’s the canary in the coal mine that sounds the alarm when danger is in the air and undetectable to humans. Human failings aren’t just limited to the inability to sniff out dangerous toxins in mines, but also to ditching natural instincts to join the crowd.

It’s intoxicating.

Well, it turns out that birds can become intoxicated as well.  This spring, there were reports of Cedar Waxwings and American Robbins becoming drunk after eating fruit that begun to rot and ferment.

These intoxicated birds lost much of their coordination and capacity to fly, resulting in them crashing into windows and other obstacles.

Could it be the bond market canaries are intoxicated and acting irrational?

This is the question I have been asking myself and will ask my guest on ‘Making Money’ today.

I’d love to hear your thoughts as well.

Jobs Picture

Jobless claims data out this morning came in slightly above consensus.

Initial claims were 218,000 versus the consensus 210,00.

Continuing claims of 1,875,000 came in as expected.

Comments

What's changed in the Corporate Bond Market? 2008 happened. That has resulted in the following shifts/changes to the Market. 1) Share Buybacks have increased in corporations 2) There has been reduced Merger and Acquisition activity since 2008 3) The Bond Market has seen a significant increase in BBB market activity. Not just domestic but Globally. Paul Krueger on 12/28/2023 11:32:56 AM

Tweet

 

Home | Products & Services | Education | In The Media | Help | About Us | Disclaimer | Privacy Policy | Terms of Use | All Rights Reserved.