RE:RE:RE:HOT PCE PRINT! Lower rates is also an ominous sign for the stock market. During the GFC recession, the Fed pivoted in Sept 2007,
the stock market peaked one month later and the recession started by years end.
It amazes me how many professionals get this one wrong. They seem to think that when rates come down, the stock market or real estate is going to rip higher. If that were to be the case this time around then you are betting against history. Lower Fed funds indicates the economy is slowing and a transition from soft landing to hard landing.
If the 10 year trades between 5 and 5.5%, then you are getting a better yield than the S&P. That would be equivalent to a P/E ratio of ~ 18 - 20. On the other hand, S&P earnings, much like gdp, has built in leverage and therefore contains risk. I would bet strongly that the stock market will have a major correction if the 10 year continues to rise because investors get similar returns but without the additional risk.
Tlt's anyone?