This article was written exclusively for Investing.com
Stocks and bonds are diverging, with equities rising and bonds trading sideways. Both asset classes appear to be telling a different story. The rising stock market tells a story of hope, while the bond market seems to be in despair. If the bond market proves to be a better indicator of the economic outlook, then the stock market may be in for a harsh reality.
Since March 23, the US Treasury rate has been hovering around 60 to 70 basis points and is going nowhere fast. The record-low interest-rates would suggest the economic outlook is not likely to improve for the US anytime soon. Meanwhile, the has risen by roughly 28.5% from the lows, suggesting perhaps the worries of the coronavirus may be behind us.
Low Rates Are A Bad Sign
Typically, one would think that low-interest rates would be positive for stocks. But in this case, the low rates suggest the economy is not likely to see a meaningful acceleration any time soon. Even…
