The major US Equity indices are just a few % points off their high for the year and yet you also have the 30 Year Treasury surpassing its low for the year. What gives? These two assets are negatively correlated and usually act accordingly. i.e Stocks go down, Treasuries go up in price and down in yield.

Earlier this year, second week of February, the Dow Jones was under 16,000 and the 30 Year Treasury was approaching 2.5%. Since then, however they have shown a positive correlation to one another, or at least have both been making those investors holding them happy as they make money on both. Now the Dow Jones is at 17,900+ and the 30 year is down to 2.46%.

‘Fed Speak’ by Yellen et al may continue to lead us to believe a rate hike is imminent and yet ‘The Market’ is taking these comments as just that, ‘words’, not ‘action’.

In the meantime making money in both stocks and long treasuries is nothing to complain about right? Until ‘reversion to the mean’ returns, i.e. stocks drop and yields don’t drop as one would expect or stocks rise even more and treasury yields rise much more than history would tell us to expect.

The bottom line continues to be the same. We will hold our collective breath that the SCB’s (Supper Central Banks) are in control and will remain in control of the Financial World as we know it. If they need to be the ‘lender of last resort’ they will be as they always have been. If they need to be the ‘buyer of last resort’ like they have since 2009 they would do that too. If the leader of this group, US Federal Reserve, cannot buy enough treasuries fast enough to save us from another Financial Armageddon, then they will buy what the ECB (European Central Bank) has been buying, Investment Grade Corporate Bonds. If this doesn’t work fast enough then they will just follow the BOJ (Bank of Japan) and PBOC (Peoples Bank of China) lead and buy stocks. After all, look how much money the Fed made for the US Treasury when they bought Preferred Shares back in 2009.

One of the ‘New Normal’ philosophies, whether politicians acknowledge it or not, is that ‘Bailouts’ work…kind of.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

Investors should consider the investment objectives, risks, charges and expenses carefully before investing.

Stock Investing involves risk including loss of principal.

The market value of corporate bonds will fluctuate, and if the bond is sold prior to maturity, the investor’s yield may differ from the advertised yield.

Government bonds and Treasury Bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.

To determine which investments may be appropriate for you, consult with your Financial advisor.

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