No bottom in the stock market with no bottom in the bond

Last Updated on 10 April 2023 by

My Dashboard on Tradingview monitoring the entire bond market in the world with my magma indicator

When investing in the long term I first look the bond market before leaping in the stocks.

Few, simple and important rules to follow:

  1. Higher Bond yields = Lower Bond Prices = Bottom in the bond market is more bottom
  2. Short-term and mid-term bond yields are closing to long-term yields (example 2-Year yield = 10-Year yield) = this means flattening = not good for long-term investment. Stay alerting for your paper profits.
  3. Short-term and mid-term bond yields are greater than long-term yields (example 2-Year yield is greater than 10-Year yield) = this means inversion = NOT GOOD, imminent fear of recession. Remember: stock market does not perform well during recessions.
  4. Short-term and mid-term bond yields are less than long-term yields (example 2-Year yield is less than 10-Year yield and going lower) = this means steepening. That’s fine, economics sounds good for long-term investments.

Looking at the figure above: United States, Canada, Brazil are countries with the most prolongated inversions in the bond yields (highlighted with red circles).

Last but not least rule.

5. More prolongated inversion = not good, twice.

Flattening areas (yellow circles) have to be carefully monitored.

Good perspective (green circles) looking for Japan long-term and mid-term yield curves are steepening. The same good news for Australia.

Giancarlo Pagliaroli

Disclaimer: The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by me.

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