### Summary
The S&P 500 returns over the last one, five, and ten years are only slightly above their long-term averages, suggesting that the stock market is not unanchored from reality. However, the performance of long-term US Treasuries has been poor, with even 10-year Treasuries resulting in losses over the last five years. Slower economic growth may be on the horizon, but it remains uncertain whether it will be enough to bring down inflation rates.
### Facts
- The S&P 500 returns over the last one, five, and ten years are only slightly above their long-term averages.
- The performance of long-term US Treasuries has been weak, resulting in losses for investors even after accounting for coupon payments.
- Slower economic growth may be on the horizon, but it remains uncertain if it will bring down inflation rates.
- The nature of the stock market rally suggests that investors are still searching for buying opportunities rather than thinking about selling.
- Energy, industrials, and financials have become favored sectors, while technology stocks have started to decline.
- The Chinese economy is struggling, with retail sales and industrial production growth slowing down.
- The Federal Reserve has expressed concerns about inflation but also noted downside risks to the economy.
###
The U.S. stock market experienced a milder bear market in 2022 compared to historical bear markets, with a decline of 25% from its prior high, and history suggests that a new bull market is likely to follow soon.
Long-term holders of Bitcoin are continuing to accumulate the cryptocurrency despite recent market volatility, indicating a bullish outlook for the future, according to analysts from Bitfinex. However, newer long-term holders who acquired their positions during the bear market are showing more unease and have exited their positions during price drops.
A surge in bond issuance by U.S. investment-grade-rated companies is putting pressure on long-end U.S. Treasuries as investors opt for higher-yielding corporate debt over government bonds.
The stock market experienced a correction as Treasury yields increased, causing major indexes to break key support levels and leading stocks to suffer damage, while only a few stocks held up relatively well; however, it is currently not a favorable time for new purchases in the market.
The Federal Reserve's decision to hold interest rates and the possibility of rates remaining higher for longer may have triggered a sell-off in the US equities and cryptocurrency markets, with risk assets typically underperforming in a high-interest-rate environment.
US bond markets have been experiencing a rare and powerful trend known as bear steepening, which involves a significant increase in long-term yields, and if left unchecked, it could have detrimental effects on equity markets and the overall economy.
The recent decline in the market and various indicators suggest that the market may already be in or very close to a bear market, signaling the need for caution and a potential economic recession.
Rising Treasury rates and oil prices are creating an unfavorable situation for consumers, investors, and the economy, making it challenging for the Federal Reserve to manage inflation without causing a recession. The potential for a "soft landing" and decreased inflation remains, but the economy should prepare for possible sector-by-sector recessions and a full-blown recession, along with government shutdowns and fiscal policy disputes becoming normal occurrences. The discrepancy between short-term and longer-term rates controlled by the Fed has gained importance, with higher borrowing costs disrupting the stock and bond markets. In this volatile period, long-term investors should hold on and ensure they have enough money saved to weather the storm. While the Fed has pushed short-term rates higher, it has also benefited savers with higher yields on money market funds, short-term Treasury bills, and high-yield savings accounts. However, a strong dollar has impacted S&P 500 earnings, leading to a struggling stock market and increased costs for imports and exports. Rising interest rates pose the greatest economic challenge, affecting consumer loans and dampening spending. Traders who bet on long-term bonds have faced losses due to rising rates, highlighting the inverse relationship between interest rates and bond prices. As a result, it may be advisable to purchase shorter-term Treasuries and keep bond durations lower. The surge in bond yields has also disrupted stock investors' expectations of controlled inflation and the Fed's tightening, leading to stock market losses. The economy and markets may experience more turmoil, as there are various factors beyond the Federal Reserve's control.
The US economy is facing turbulence as inflation rates rise, causing losses in US Treasuries and raising concerns about the impact of high interest rates on assets like Bitcoin and the stock market. With additional government debt expected to mature in the next year, there is a fear of financial instability and the potential for severe disruptions in the financial system. The Federal Reserve may continue to support the financial system through emergency credit lines, which could benefit assets like Bitcoin.
The major stock indexes are expected to open lower as the 10-year Treasury yield hits a 16-year high, with investors monitoring employment data for potential impact on interest rates; meanwhile, stock futures in Asia and Europe slumped as the Federal Reserve's message of higher interest rates reverberates worldwide.
The selloff in Treasuries has intensified as yields reach multiyear highs on speculation that the Federal Reserve will continue raising interest rates, causing losses for investors and impacting stock valuations.
The Federal Reserve's shift towards higher interest rates is causing significant turmoil in financial markets, with major averages falling and Treasury yields reaching their highest levels in 16 years, resulting in increased costs of capital for companies and potential challenges for banks and consumers.
US 30-year Treasuries yields reach 16-year high as investors demand higher returns for holding long-term debt, while Asian and European equities slump on similar concerns; also, TikTok halts e-commerce in Indonesia, and Netflix plans to increase subscription prices for ad-free streaming.
The slump in US Treasuries has caused a sell-off in emerging-market debt, resulting in the yield on bonds exceeding the earnings yield on stocks, a rare anomaly that historically signifies increased risk.
Long-term yields on Treasuries have reached levels not seen since the global financial crisis, driven by expectations of higher interest rates, strong U.S. economic data, and concerns about inflation, leading to a sell-off in bonds.
The sell-off in US Treasuries has caused shockwaves in global financial markets, leading to a decline in Indian stocks and sparking caution among investors ahead of the Reserve Bank of India's Monetary Policy Committee meeting, with expectations that the key repo rate will remain unchanged.
The fixed-income market is experiencing the "greatest bond bear market of all time" according to Bank of America Global Research, as the yield on 30-year US Treasuries hit a peak-to-trough loss of 50% and bond funds saw $2.5 billion in outflows, while shorter-dated paper and equity funds continue to see inflows.
The "greatest bond bear market of all time" is occurring as the fixed-income market faces a significant decline in the U.S. 30-year yield, leading to outflows from bond funds and a rise in Treasury yields.
The US Treasury bond market is experiencing the greatest bear market of all time, with a significant decline in performance and a 50% loss in the 30-year US Treasury bonds.
The market for U.S. Treasury bonds is experiencing the biggest bear market in history, with a decline of almost a quarter of its value since 2020, surpassing previous bear markets in the 19th century, according to analysts at Bank of America. Exchange-traded funds (ETFs) exposed to U.S. Treasurys, such as the iShares 20+ Year Treasury Bond ETF, have been heavily impacted.
Despite the ongoing bear market in Treasury bonds, certain sectors of the fixed-income market, such as bank loans, short-term junk bonds, and floating-rate notes, are performing well in 2023, offering some protection from the losses in long-term Treasuries, which have slumped 46% since March 2020. The future performance of long-dated bonds depends on the Federal Reserve's monetary policy and the resilience of the economy.
Bitcoin's bear market may be over and an upward expansion is likely, according to a popular crypto analyst who compares the current situation to that before the 2016 and 2020 bull markets.
Asia-Pacific markets are expected to have a positive start to the week, with Chinese markets returning from a week-long holiday and investors watching inflation readings and trade data from China and India, as well as a monetary policy decision from Singapore's central bank. In Australia, the S&P/ASX 200 is up after a five-day losing streak, while futures for Hong Kong's Hang Seng index point to a stronger open. However, the outbreak of war between Israel and Palestine has affected stock futures and led to higher oil prices. There is also an increased likelihood of the Federal Reserve raising interest rates by the end of the year, causing utilities stocks to sink as investors find short-term Treasuries more attractive.
The S&P 500 has entered a bull market, marking a rise of 20% or more from its recent low, with hopes that the economy will continue to defy predictions of a recession caused by high inflation and aggressive measures taken by the Federal Reserve. However, concerns remain as the Fed is expected to continue hiking interest rates and the gains in the market have mainly been driven by a small group of stocks, raising sustainability concerns. Bull markets typically last around 5 years with gains of 177.8%, while the previous bull market lasted 21 months and the current one began on Oct. 13, 2022. The recent bear market ended on Oct. 12, 2022, with a duration of nine months and a drop of 25.4%.
US bonds are undergoing their worst-ever rout, with yields spiking and investors concerned about the Federal Reserve's fight against inflation, making it the deepest bond bear market in the history of the US, according to Bank of America.
Treasury debt losses over the past three years have resulted in the worst bear market for the U.S. in its nearly 250-year history, with long-duration Treasury yields reaching their highest levels in over 16 years, putting pressure on U.S. stocks.
The current inversion of the yield curve suggests a potential bear market starting in the fall, with the stock market expected to reach 18-month highs this year and all-time highs in 2024.
Investors in U.S. Treasuries are feeling on edge due to news of increased consumer prices and weak demand, suggesting that volatility in the fixed-income markets continues, while lower bond yields reflect a desire for safe assets amidst uncertainty caused by the war in Israel, with concerns of further tightening from the Federal Reserve and mixed economic data from China adding to the market's unease.
The ongoing bond market selloff is causing the worst Treasury bear market in history, but investors are not panicking due to the orderly nature of the decline and the presence of institutional investors and shorter-term bonds as alternative options.
The crash of the U.S. Treasuries market, with many bonds trading at 50% of their face value, has sparked concerns about inflation and government spending and is being seen as a warning about a potential financial crisis.
The majority of stocks are currently underperforming, indicating a possible stock market crash, as treasuries experience a disturbing crash and credit spreads start to widen, according to analyst Michael A. Gayed.
U.S. asset manager Vanguard believes that longer-dated Treasuries are attractive investments due to an expected economic slowdown next year and the belief that the Federal Reserve's rate hiking cycle is coming to an end.
The bond markets are going through a volatile period, with collapsing bond prices and rising yields, as investors dump US treasuries due to factors such as fears of conflict in the Middle East and concerns about President Joe Biden's high-spending approach, leading to higher interest rates and impacting mortgages and debt.
The current market correction is causing uncertainty about whether we are still in a bull market or entering a bear market, but historical data suggests that the bull market is not over and a correction is to be expected.
