The First Real Rotation
Over the past eight months, since the election, we have heard a lot about rotation. And in a sense we saw a bit of that, switches between various equity sectors. Today we are seeing the first real rotation, money out of stocks into bonds. This will go on for a while, until inflation starts to play on bonds. That is when things will get interesting. A time when bonds and stocks go down at the same time.
Those are the guru’s explaining everything today. This will get more interesting as leverage starts to be pulled from the markets.
Here again is the updated chart of the S&P price divided by the 10 year interest rate. You can see that nothing has really happened since the breakout on April 15. The market keeps trying to fool itself.