Do Bonds Signal Trouble for Stocks?


This week, despite a strong auction, the benchmark ten-year U.S. Treasury note’s yield hit a nine-month high of 2.6% Wednesday. The alarm bells started ringing.

The day before, former bond king Bill Gross, whose track record has been mixed at best, especially during the latter years of his tenure with Pimco, declared a bear market in bonds had been “confirmed” because rate increases had broken the multiyear down trend in yields. (He later said, “bonds, like men, are in a bear market,” but I won’t go there.)

On Wednesday afternoon I spoke with technician Craig Johnson, who has a consistently good long-term bullish track record. He told me yields were heading higher and the 36-year-long bull market in bonds was probably over.

Meanwhile, on Thursday, the Dow Jones Industrial Average, the S&P 500 index, and the Nasdaq Composite index all hit new all-time highs, and show no signs of stopping.

As I wrote in MarketWatch, Johnson urged clients to take some profits in advance of a potential 20% correction in stocks brought on by increases in bond yields.

Should you sell?

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