Both short-term and long-term, the large liquid US stock market indices have become massively decoupled from the bond and credit markets. Since the former is supposed to discount a combination of the latter (macro growth/de-growth from bonds and micro business-risk/cash-flow-sustainability from credit), one has to wonder which reality will come to pass...
Short-term...
[4]
Long-term...
[5]
Do either of these charts look 'normal'? Sustainable?
* * *
Simply put - for American companies, despite the fall in Treasury yields, the cost of borrowing (i.e. interest rates) has already started to increase rather dramatically and that's not just energy names.
Charts: Bloomberg
* * *
Don't worry though, it's different this time...
[6]
