InternationalMarkets & Economy

Were it not for the rest of the world’s self-entanglement, the US would be rocking

This is the great disconnect of our time.
  • In a week with little new U.S. data (apartments hot, single-family not), bonds and mortgages stayed the same -- which is remarkable, given the performance of stocks.
  • These two markets usually trade opposite each other, stocks up on good economic news, bonds down in price and up in yield, and vice-versa on bad news.
  • In a normal world, big central bank stimulus would be good news for stocks, but this world is not at all normal. Unprecedented, fantastic stimulus by overseas banks has done nothing more than to hold up the economic floor and to buy time.

This week was an exercise in perspective, stocks versus bonds and mortgages, and here versus over there. In a week with little new U.S. data (apartments hot, single-family not), bonds and mortgages stayed the same -- which is remarkable, given the performance of stocks. The 10-year T-note could not break below 2.00 percent, mortgages just under 4.00 percent, but unchanged all through October while the Dow rocketed 500 points in the last two days. These two markets usually trade opposite each other, stocks up on good economic news, bonds down in price and up in yield, and vice-versa on bad news. Good news should help corporate earnings and stocks, but any good news brings fear to bonds that the Fed will do something awful. I have worked in or near credit markets for 40 years, and like all colleagues, regard the stock market as cognitively impaired and bi-polar, heavily overweighted to the manic side. Those people reciprocate, viewing us as depressed and void of imagination. How co...