Until recently, the stock and bond markets have both signaled a great deal of optimism about the economy. But bond yields have started to creep up, which says that fixed income investors are becoming wary. We’ve noted in several posts that inflation is running at a higher rate than the oft-cited CPI stats would lead one to believe, and higher inflation expectations would translate into higher bond yields.
From Eddy Elfenbein at Seeking Alpha:
As the stock market keeps chugging higher, the bond market is starting to fall behind.
As a very general rule, the bond market leads the stock market by a few months. In the chart below, I’m using the American Century Target Mat 2025 Inv [BTTRX] mutual fund as my bond proxy. Note how the bond market (the gold line) started fall behind the stock market before the Shanghai Surprise in February.