It started in the bond market, it has to end there. Until there is a bid for Treasurys – at least short and intermediate term Treasurys, the stock market cannot stabilize. I saw the big Treasury bond ETFs stop going down Friday, but I held off until today at the close before posting this.
I don’t know if this is just a way station before a new set of lower prices / higher yields. But I believe, strongly, that there are trillions of dollars controlled by pools of capital that would very gladly accept a 3% annual return on their money given where rates were relative to inflation just six months ago. So, I am hopeful, I guess, that we have seen the velocity play out – the worst of the move is behind us now and prices have reset to a more attractive place.
But if not, there’s no hope for stocks to have bottomed. It’s like those movies where the band of adventurers have to follow the monster back to its cave and kill it where it all began in order to ride the land of its threat. Think Beowulf or The 13th Warrior. The bond bleeding must come first before the correction can end.
