Higher Rates… Higher TBT

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Aug. 19 (Bloomberg) -- On today's "Insight & Action," Adam Johnson looks at the outlook for the S&P 500 and upcoming Federal Reserve changes on Bloomberg Television's "Street Smart." (Source: Bloomberg)

The more things change, the more they stay the same.

It is time for a little insight and action.

Remember the good old days?

When bond yields and stock prices moved together?

And it made sense back then, because rates went up when there was growth in the economy, and as a result, stocks went up.

The flipside was when you had shrinkage in the economy, you had shrinkage in earnings.

On the yields and stock prices, they moved together, the good old days.

And then came the fed sugar, and look what happened.

It became totally unglued.

Look at that difference creates on the one hand, you had the stock prices that went up and the bond yields that went down and stayed down for the, quote, extended period of time, and look at what has been happening, as there is talk of fed tapering that could happen as soon as september.

By the way, that is only two weeks, ok?

That summer is almost over, and as a result, we have a number of strategists who are weighing in on what that means for the market.

One says it is a period of adjustment.

We are all trying to figure out what that means.

Do we need to find some sort of equilibrium?

Another, admittedly, we have lost momentum globally, and are closer who is about to join us right now, he reminds us that september is a seasonally challenging period.

Typically, september is a weak month.

We talked about buying puts on the s&p 500. we are sorry to tell you if you are long.

The fact is, that is only half of the story.

Here is the other half.

If stocks come down, rates go up, and there is tbt.

Remember, it adjusts to 200% of the daily yield of the bonds.

What i have shown you going back three years, you can see there is plenty of runway.

It is trading right now at about 80 versus 160 if you go back far enough.

One thing people are trying to figure out.

The charge guru for wall street and also the head of one department, welcome, chris.

September is notoriously weak.

You say that matters.

It tends to be a little more challenging.

I think it is important that we put this in context.

Looking at any seasonable -- seasonal weakness, 1600, 16 20 -- -- 1620. we have been describing this market as close to oversold but not there yet.

Over the next weeks, taking us to an oversold -- adam referenced the fact that everything is trading on paper.

Have they been accurate in the past months and years?

Seasonals are not utilized enough by the street.

We are looking for what creates a buying opportunity for the back half of the year.

There is one thing that adam

This text has been automatically generated. It may not be 100% accurate.


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