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“You must not only learn to live with tension, you must seek it out. You must learn to thrive on stress.” – J. Paul Getty
Thankfully, it’s Friday. After another week of declines for equities, futures were modestly positive this morning, but that changed with the release of the February employment report. The bond market was already showing some signs of concern heading into the release, and those concerns look to have been warranted as the headline number came in well above forecasts (379K vs 200K). In reaction to the report, the 10-year yield has risen from a pre-release level of 1.58% to 1.62% now.
Be sure to check out today’s Morning Lineup for updates on the latest market news and events, movements in the Japanese bond market, German factory orders, an update on the latest national and international COVID trends, including our series of charts tracking vaccinations, and much more.
Normally, when the equity market comes under selling pressure bonds rally providing some level of cushion to a diversified portfolio. In the last few weeks, though, that still hasn’t been the case. The chart below is from the second page of the Morning Lineup and shows the relative strength of the S&P 500 versus the US Treasury Long Bond Future. In an environment like the last couple of weeks where stocks have been weak, you would expect the relative strength line of the S&P 500 to decline, but so far during this pullback that hasn’t been the case. Despite a 4.6% pullback in the S&P 500, its relative strength versus the Long bond Future remains near 52-week highs.