For several months there’s been an inverse relationship between U.S. 30- year Treasury yields (TYX) and the S&P 500 (SPX). The relationship is in effect as of early 2024. Most in the investment community are probably focused on the FOMC interest rate decisions in regard to the direction of U.S. stocks. In 2024 it could be better to concentrate on the relationship between SPX and TYX.
The daily SPX and TYX chart courtesy of Trading View illustrates their relationship.
The early 2024 rise in TYX corresponds to the SPX decline confirming the relationship continues.
The FOMC controls short-term rates/yields not long- term rates/yields. It’s expected that the FOMC could decide on three rate cuts in 2024. Assuming they do cut rates in 2024 it may not have a bullish effect on U.S. stocks.
The manic U.S. stock rally from October to December 2023 could be a classic example of “buy the rumor, sell the fact.” Three short-term rate cuts may already be factored into the U.S. stock market.
So, while most in the investment community speculate on, if and when the FOMC cuts rates. Our attention should be focused on the SPX and TYX relationship.
Four Dimension Trading 