The bond market is signaling trouble ahead for stocks, reports Jefferies, a firm that apparently just learned bonds and stocks exist in the same financial system.
Elevated real yields could mean weak stock market returns ahead. Could. Not will. Could. This is the analyst equivalent of your weatherman saying it could rain sometime between now and your death.
Real yields measure the return on bonds after inflation eats through your portfolio like termites through balsa wood. When they go up, stocks supposedly go down. Jefferies charges institutional clients six figures annually to explain correlations a sophomore economics major learns between beer pongs.
The bond market signals trouble the way your check engine light signals trouble. It's always on. Retail traders ignore it until their transmission falls out on the highway, then they blame Jerome Powell.
Jefferies failed to mention when these weak returns arrive. Next week? Next decade? After the heat death of the universe? Timelines are for peasants who demand accountability.
Here's what actually happens. Retail buys stocks because number went up yesterday. Bond yields rise. Jefferies publishes a report. Retail reads headline. Retail panics. Retail sells at a loss. Bonds keep doing whatever bonds do, which is bore everyone who understands them.
The bond market signals as clearly as a mime having a stroke. But some analyst at Jefferies stared at a chart until he saw the face of God, or at least the face of a client who might pay for this insight.
Real yields could mean weak returns the same way clouds could mean rain. Observationally true. Predictively useless. Financially expensive if you're the sucker paying Jefferies to tell you what might happen under certain conditions that may or may not occur.
The bond market isn't signaling anything except that Jefferies needed to publish something this week.
Photo by Maxim Hopman on Unsplash
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