The bond market has collapsed. Why would a strategist say embrace the pain and go back?

Investors are more or less trained to think of assets in terms of the stock market. That is, a correction is a decrease of 10% from its peak, a bear market is a decrease of 20%, etc.

But not all assets are equal. In a volatile market like Bitcoin BTCUSD for example,
+ 0.05%And
20% drop is no big deal. On the contrary, for a stable asset such as a bond, a smaller decline has a larger effect.

The 11% drop in the Bloomberg US Total Bond Index from its peak is the biggest drop since the bond bull market began more than 40 years ago. “People, this was a bond crash,” says Kevin Moyer of the Macro Tourist blog. “There is no other way to describe it.”

So the natural discussion after a crash is whether or when fortunes will be reversed. Lance Roberts, chief investment strategist at RIA Advisors, explains that now is the time.

Roberts says the US economy is more efficient than ever, with the average consumer needing $6,400 a year in debt to maintain their current standard of living. “This is why, with the heavy requirements of cheap debt to support a standard of living, sharp increases in interest rates have an almost immediate effect on economic activity,” he adds.

Technically, he adds, the 10-year Treasury yield TMUBMUSD10Y,
2.889%
It is now 4 standard deviations above the 52-week moving average, and near the top of the long-term downtrend channel from 1980.

Roberts says that while yields can rise temporarily, there is a point where something breaks, leading to deflationary pressures to reassert itself. Roberts notes that previous bear bond markets have been met by new highs, in less than two months.

“While bond buying today may still be experiencing some ‘pain’, we are likely to be closer to a major buying opportunity than not,” he says. “More importantly, if we are correct, the next bull market is likely to outperform in Bonds on stocks and inflation-linked trades over the next 12 months.”

commotion

Microsoft MSFT,
-4.18%
Exceeding earnings expectations after price hikes for the Office suite of products.

Google owner Alphabet GOOGL,
-3.72%
Announcing a profit increase that didn’t beat analysts’ estimates, it announced a new $70 billion share buyback plan.

Wednesday’s earnings list includes Boeing BA,
-3.49%And
T Mobile US TMUS,
-6.92%And
And after the shutdown, owner of Facebook Meta Platforms FB,
-2.56%
and Ford Motor Co. F,
-3.15%

Mattel Matt,
-1.46%
Shares rose in pre-market activity after the Wall Street Journal reported that the toy maker had held informal talks with private equity firms Apollo Global Management and El Caterton about its purchase.

European natural gas contracts rose after Russia cut supplies to Poland and Bulgaria.

Economists at Barclays cut their first-quarter GDP estimates by 1.2 points to 0.5% ahead of Thursday’s release.

Archegos Capital Management Bill Huang has reportedly been arrested for deceiving Wall Street banks about his properties.

market

US stock futures ES00,
+ 0.24%

NQ00,
+ 0.30%
Pointing higher after the 2.8% drop in the S&P 500 SPX,
-3.63%
On Tuesday, the index slipped 13% from its record high at the start of the year.

The 10-year Treasury yield is TMUBMUSD10Y,
2.889%
It fell to 2.74%. EURUSD,
+ 0.48%
It touched a new five-year low against the dollar.

The most important indicators

Here are the most active stock market indicators on MarketWatch as of 6 AM ET.

random readings

Why is the Los Angeles Times protesting the mayor’s investigation into the leak against one of its reporters.

SpaceX, Elon Musk’s other company, has launched four astronauts into space for NASA.

Back on Earth, CERN’s particle accelerator restarted after a three-year hiatus.

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