Stocks and Bonds are on a Collision Course

BCA Research warns that US stocks and bonds are on a collision course, requiring an equity selloff to generate the disinflationary pressure needed to lower bond yields. Market breadth is at record lows, with gains concentrated in AI and semiconductors while the Fed remains boxed in by rising inflation.

Key Takeaways

• 1.US stocks and bonds are on a collision course; only a significant equity selloff is likely to bring bond yields lower.
• 2.Historical patterns suggest the Fed's next move will be a rate hike as the US two-year yield has crossed above the Fed funds rate.
• 3.Equity market breadth is dangerously narrow, led primarily by AI and semiconductor stocks while the 'old economy' struggles.

Table of Contents

• The Fed Is Boxed In
• Poor Equity Breadth
• The US Dollar And EM Fixed Income

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