Since the end of March, the AI trade has once again captured investor attention. But with the rise of the broad indexes, trouble is brewing in the bond markets. Again.
The 30-year U.S. Treasury bond is up to a near 5% yield and highs last seen during the height of the Biden-era government spending binge.
Historically, yields at 5% or higher also spell trouble for the stock market:
Bond yields are edging back to 5%, reflecting the potential for higher inflation, potentially signaling a crisis in the stock market. (Source: CNBC)
Why are bond yields rising? Again, inflation expectations play a role. The stalemate in the Strait of Hormuz has pushed oil prices to $95 a barrel. Other commodities, notably fertilizer, have also soared. Both put pressure on household staples, gas and food prices.
With investors piling back into the AI trade, locking in higher yields could be the smart move for savers. When a stock market crisis hits, and investors shift to bonds, prices will soar, and yields will drop.
A Grey Swan take: The bond market is as important as ever. And it’s flashing a glaring red warning sign. For a specific inflation hedge to buy right now, check out our Shadow Stock recommendation for paid-up Grey Swan Pro members, right here.
~ Addison
P.S. If you missed Grey Swan Live! yesterday with Zoltan Istvan, we got a whirlwind view of the future, Zoltan-style, which we dubbed “Robots, UBI, and Wine”…
In one stirring anecdote, Mr. Istvan described a recent letter he wrote to his wife. After three decades of buying, trading and developing real estate using the credit markets, they are planning for a “black swan” deflationary environment by deleveraging their real estate, something he’s never done with his own money…
I tried to persuade him to use the term “grey swan” instead, since it’s a trend he can see comin’. We’ll see if he comes around.
One curious story, while he’s planting more vines in his vineyard in Napa, he knows several other grape growers who are ripping their vines out of the ground, because it’s cheaper to let the land lie fallow than pay to deal with California’s onerous regulatory environment. Another sign of things to come?
Perhaps. Check out Zoltan’s interesting and very unique perspective on AI, the acceleration of change, and the future of value in the markets… stocks, bonds, real estate and tech. All very thought-provoking and worth a listen.
