“All courses of action are risky, so prudence is not in avoiding danger (it is impossible), but calculating risk and acting decisively.” ~ Niccolo Machiavelli

Good evening,

Treasury yields continued to climb this week, with the US 10-year reaching 16-year highs. On Friday, it rose above the 5% level for the first time since 2007, albeit briefly. This had the expected effect on markets, with all three major US indices closing sharply down. 

Equities actually climbed slightly on Monday, even with yields rising, causing Fundstrat’s Head of Research, Tom Lee, to observe that “the correlation between rising yields and falling stocks seemed to have momentarily disconnected.” Lee viewed this as a temporary condition, however, noting that “in the short term, I’m not sure this will be a stable dynamic.”

Head of Technical Strategy Mark Newton also questioned whether this would continue, but similarly observed that “when you look at the correlation now between equities and Treasuries, which had been very, very strong – they're starting to split a little bit.” Although the markets ultimately fell on Friday and closed the week lower, Newton noted during our weekly research huddle that “the move up in rates has not really adversely affected the stock m...

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