A Climbing 10-Year Treasury Yield Will Eventually Crack The Market equities market stockmarket [qNhYsFmrNlO]
It will take years to wash away the fiscal and monetary excess of 2020-2022 – a period of unprecedented growth in the money supply. This period was the cherry on top of a decade-plus of Quantitative Easing which got investors hooked on cheap debt and the Fed put. Investor psychology won’t change overnight. Investors are hooked on cheap debt and sky high valuations. The bubble mentality started to deflate in 2022 in anticipation of the Fed taking the punch bowl away, which it eventually did in May 2022. However, this process of resetting valuations has been slow. Is there something on the horizon that may drive markets lower for an extended period of time? The short answer is “Yes”. That something is the 10-year Treasury yield working its way higher. I don’t see the 10-year yield magically halting at 5%. The 10-year yield will continue to climb well beyond 5%. It is easy to imagine a scenario where the Fed holds its Fed Funds rate above 5%, yet feels the need to exercise Quantitative Easing at the long-end of the curve in an effort to control the 10-year yield which underpins most U.S. economic activity. Before we get there, let’s review how we got into this inflationary, debt-funded mess. READ THIS ARTICLE IN FULL HERE: