With the market advancing on three of the last four days while the yield on the Ten Year Treasury also rising, it seem the inverse relationship between these two prices no longer holds. Yet such a conclusion would neglect and discount the time lags occurring and existing between the related elements making up the economic and market profile.
Our recent analysis finds a ten-day delay between increases in interest rates and decreases in the closing price of the S&P500 Index. We first presented this evidence in our June 25 post – with subsequent market action verifying that relationship.
We update that projection today: it shows that the recent stock market increases continue to follow the ten days ago capital values of the Ten Year Treasury Bonds.
Accordingly, the latest stock advances fail to contradict this association; moreover, expect reversals in the near future, given the current increases in interest rates.
Remember, that the price of a bond with a constant income payout is the inverse of its interest rate. Accordingly, the recent decrease in the bond’s value reflects the rise in the interest rate of the Ten Year Treasury Bond.
DJIA .98 percent
NASDAQ 1.04 percent
S&P500 1.02 percent
