I posted this blog post and tweet on July 30. We are now there in the bedlam zone!
Last time US 10 Year Yield was at similar level was in MAY 2008. Fed was already in the midst of a rate cutting cycle and rates were declining from around 5.25%. But most of the decline in stock market started around this level and markets proceeded to drop 50% from there. By various consensus, Fed is almost at the end to tightening cycle now - not yet in cutting cycle.
History rhymes ! We are not exactly there and it is possible stocks can chop around or may even try to make a new high. But if economic history is any guide - path ahead is tricky.
To me, the wildcard is the labour market. Keep an eye on labour market data to see which way the wind is blowing. Remember, it all begins as a trickle, before the floodgate opens.
A 50% drop takes us to below Covid lows. A nice zone of demand awaits us there .
