The 10-year yield and the $SPX have been moving in lockstep lately. This matters more than people think.
When bonds and stocks rise together, it usually means growth optimism is driving everything. When they fall together, it's fear. When they diverge? That's when things get interesting.
Right now, the correlation is tight. Markets are pricing in a specific story: stable growth, controlled inflation, no major shocks. That's a comfortable narrative.
But tight correlations don't last. Something always breaks the pattern—a Fed surprise, a credit event, a geopolitical shock. The question isn't if the correlation will break, but when, and what that break will tell us about what's really happening beneath the surface.
Watch the divergences. They're usually more honest than the consensus.
When bonds and stocks rise together, it usually means growth optimism is driving everything. When they fall together, it's fear. When they diverge? That's when things get interesting.
Right now, the correlation is tight. Markets are pricing in a specific story: stable growth, controlled inflation, no major shocks. That's a comfortable narrative.
But tight correlations don't last. Something always breaks the pattern—a Fed surprise, a credit event, a geopolitical shock. The question isn't if the correlation will break, but when, and what that break will tell us about what's really happening beneath the surface.
Watch the divergences. They're usually more honest than the consensus.