When The Bond And Stock Markets Disagree - PowerShares 1-30 Laddered Treasury Portfolio ETF (NYSEARCA:PLW) | Seeking Alpha

When The Bond And Stock Markets Disagree - PowerShares 1-30 Laddered Treasury Portfolio ETF (NYSEARCA:PLW) | Seeking Alpha



Here is an outstanding article of what to think about when stocks and bonds disagree.  Many believe the stock market is at a top, and they are buying bonds for safety.  I lean in this direction, but as long as interest rates are low the stock market can go higher.  When the ten-year bond interest gets near 4%, we will be at the doorstep of a bear market because businesses will have to pay too much to borrow money for operations.  We are not even close to that situation yet.



The author presented some excellent charts about the yield curve flattening which leads to a bear market, though.  He compared the 10-year yield to the 2-year bond yield and proved that recessions occur when the yield curve is near 0.  Another point which was made by the author is that foreign investors and loading up on long-term U.S. treasury bonds because it is money safety and many foreign countries offer lower yields on bonds.  So, the bottom line is that we need to be defensive on stocks and keep a constant eye out for danger signs.