Global bond yields rise, pressuring stocks and AI names
Global bond yields are rising, with Japan’s 10-year government bond yield at 3%, the highest since 1996. The note says the move is pressuring stocks early, especially AI-linked names.
Long Bond In Danger Zone Please click here for an enlarged chart of iShares 20+ Year Treasury Bond ETF (NASDAQ: TLT ).
Note the following: The chart shows that TLT has dipped back into the danger zone.
It is not just the U.S.
A global bond route is taking place this morning.
Japan is at the center.
The yield on the 10 year Japanese government bond (JGB) reached 3%.
This JGB yield is the highest since 1996.
Here are the reasons: Treasury Secretary Bessent is putting pressure on Japan to strengthen the yen.
In our analysis, the easiest way to strengthen the yen is for the Bank of Japan (BOJ) to raise interest rates.
There is a report that Japan’s next budget may be the largest ever, causing the deficit to rise.
The foregoing is adding to existing concerns about large government debt.
Yields in France and Germany are rising.
The reason is that new data shows inflation in the Eurozone has risen to 3.3%.
In our analysis, the European Central Bank (ECB) is likely to raise rates.
Rising yields are bringing in selling in stocks in the early trade, especially in the AI trade.
Oil is rising on the news that two supertankers have been hit in the Strait of Hormuz.
Rising oil is sparking inflation worries and, in turn, rising yields.
On the positive side for the stock market, the momo crowd is buying stocks, ignoring rising yields and rising oil.
The reason is that momo gurus have two narratives.
When yields rise or oil rises, momo guru’s narrative is that these have nothing to do with AI stocks, so they urge their followers to buy AI stocks.
On the other hand, when yields fall or oil falls, momo gurus give these as reasons to their followers to buy stocks.
There is a large swath of investors who do not understand that the momo gurus’ real job is not to provide objective analysis but to run up stocks in the disguise of analysis.
Expect blind money to flow into the stock market today and tomorrow.
Blind money is the money that flows into the stock market on the first two days of the month without any analysis irrespective of market conditions.
Magnificent Seven Money Flows Most portfolios are now heavily concentrated in the Mag 7 stocks.
For this reason, it is important to pay attention to early money flows in the Mag 7 stocks on a daily basis.
In the early trade, money flows are neutral in Apple Inc (NASDAQ: AAPL ).
In the early trade, money flows are negative in Amazon.com, Inc. (NASDAQ: AMZN ), Alphabet Inc Class C (NASDAQ: GOOG ), Meta Platforms Inc (NASDAQ: META ), Microsoft Corp (NASDAQ: MSFT ), NVIDIA Corp (NASDAQ: NVDA ), and Tesla Inc (NASDAQ: TSLA ).
In the early trade, money flows are negative in SPDR S&P 500 ETF Trust (NYSE: SPY ) and Invesco QQQ Trust Series 1 (NASDAQ: QQQ ).
Momo Crowd And Smart Money In Stocks Investors can gain an edge by knowing money flows in SPY and QQQ.
Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil.
The most popular ETF for gold is SPDR Gold Trust (GLD).
The most popular ETF for silver is iShares Silver Trust (SLV).
The most popular ETF for oil is United States Oil ETF (USO).
Bitcoin Bitcoin (CRYPTO:BTC) is range bound.
What To Do Now Consider continuing to hold good, very long term, existing positions and add tactical positions based on signals.