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Bond Market Speculators: We Will Get Fooled Again

Bond Market Speculators: We Will Get Fooled Again

February 13, 2024

The Who promised fans they won’t get fooled again in 1971. Have the bond players of today forgotten the lyrics?

We have been under the view that aggressive bond speculators have been trying to out-guess the Fed at their own game. By the reaction to this mornings’ CPI, the bond market is saying their guesses missed the mark and, yes, we will get fooled again and again and again. The 10-year is hovering around 4.25% today, in contrast to the late 2023 reading of 3.85%. Wide swings in yields have been with us for a while.

In lockstep, stocks sold off today, contrasting ratings with the surge in optimism towards equities we’ve seen since the October bottom. Was that unfounded?

If one’s investment strategy is solely based on the bullish case for stocks requires Fed loosening while ignoring the input of earnings growth into the equation, then plan on getting fooled some more based on bond market swings -- swings that haven't yet stopped the stock bull market that began in October 2022.