Workshop

Which is better: the stock market or the bond market?

By Steve BenenThe stock market has risen since the election, but that does not mean the bond markets have been in a bubble.

While the markets are up, so are the bond prices.

The average yield on bonds rose 4.6 percent to 3.7 percent last week, according to the Federal Reserve Bank of San Francisco.

That’s a 3.6-percent increase from a year ago. 

The bond market, meanwhile, has continued its slide, with yields rising just 1.9 percent to 2.4 percent.

The benchmark 10-year Treasury note has risen to its highest level since August. 

In other words, bonds and stocks have been very close to each other. 

But this is not the beginning of the end for stocks.

As Benen explains, the Federal Open Market Committee is likely to cut rates later this month. 

Benen points out that the Federal Funds rate is currently at a record low of 1.25 percent, meaning that the Fed is in a position to continue cutting rates to keep interest rates low for a long time. 

So, if the Fed cut rates earlier this month, bond prices could be in for another period of record highs, while stocks could be a lot higher. 

This is because bond prices have been largely immune to the effects of the Fed’s decision to cut its rate. 

If the Fed did not cut its rates in September, it could have set the stage for a sharp decline in bond prices, which would have wiped out a lot of the gains from the bond-market boom. 

As Benen says, this could be an opportunity for the markets to rally.

The market is still in a period of extraordinary volatility. 

There are signs that this will not be the case in the near future, however. 

While Benen predicts that investors may see a lot more volatility in the coming weeks, he cautions that the current price of stocks is not all that much higher than it was just before the election. 

“Investors are not as bullish on stocks as they were just before last year’s election,” he says.

“They’ve also lost a lot in the bond and equity markets.” 

As for the bond side of the market, the markets appear to be going up.

The S&P 500 index has risen 8.1 percent since last week to reach a record high. 

That’s the best performance by a single index in the history of the index.

And the S&P 500 has been gaining steadily since the Federal Election of 2016. 

And so, the market has not really been in danger of a bubble, Benen argues. 

Bond prices have continued to rise.

But, as Benen notes, this does not necessarily mean the markets will continue to rise at the same pace. 

To understand why, Ben-Paul points to the fact that the U.S. government is actually paying a lot less interest on its debt. 

Since the Fed slashed rates in August, the U,S.

Treasury has been paying $1.4 trillion in interest on a total of $4.4tn of debt.

That means that the government has been saving money to pay back its debt, while its economy has been shrinking. 

Moreover, Benben argues, the economy is not shrinking as fast as the government is making up for the lost spending. 

It has been working harder to pay down the debt and, consequently, has been spending more. 

Still, Ben benen points to a major problem for the stock markets.

The Fed has cut its policy interest rate to a record-low of 1 percent, and so investors are not yet willing to pay more to keep their money safe. 

Even if bond prices do eventually recover, Ben Benen cautions, the Fed could end up cutting its rate again before it has fully recovered from the Fed cutting its rates again. 

Meanwhile, stocks may continue to rally, and investors may continue spending.

The U.K. stock market is up nearly 4 percent in the past 24 hours. 

These are some of the best economic times since the Great Depression.

The stock market boom was built on a very solid foundation. 

What Benen and others are predicting is that stocks may begin to climb again.

But Ben Ben-Pow is not optimistic. 

He says that the stock-market rally may be temporary. 

‘It’s hard to believe that the markets could go back to normal at this point,’ he says, adding that investors are still holding on to their money and they have plenty of time to see if stocks start to recover. 

Read more at National Review