As a follow up to my morning comment, today is another of mixed messages being sent by the stock market and the US Treasury market as stocks continue to power higher while the 10 yr bond yield moves lower. Just since the Friday Aug 7th close, the S&P 500 has rallied 2.1% while the 10 yr bond yield has fallen by 8.6% (33 bps) from 3.85% to 3.52%. One major factor in the argument against the V shaped economic recovery and the stock market’s strong rally is that consumer demand is still missing and the US economy can’t have any sustainable rebound unless end demand starts to stabilize. Interestingly, with the rally in US Treasuries specifically since the Aug 7th close, coincident drop in yields, and rise in the major stock market indices, the XRT (the broad retailer ETF) is down by almost 3%. This discrepancy in markets will hopefully be answered as we finish Q3 and clarity for Q4 begins to shape up.
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