After An Extremely Rare Move In Bonds, How Have Stocks And Bonds Performed In The Past?

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It is also important to note, the expectancy for stocks over the following 30 days to 2 years was quite a bit more attractive than the expectancy for bonds. For example, over the next 90 days bonds were only green in 50% of the cases and the average loss was 0.35%, which is quite a bit less attractive than stocks that saw 70% green outcomes with an average gain of 4.75%. Over the next 60 days, stocks beat bonds by an average of 7.37%, which intuitively passes the supply and demand common sense test, given the rare one-sided nature of an extended bond market.

STUDY TWO: MONTHLY AND WEEKLY

In order to get our sample size up and allow us to look at tendencies, we examined historical cases that posted TLT/VUSTX closes above both the monthly and weekly upper Bollinger Band. Dropping the daily requirement brought the historical cases up to 18. The results were very similar; the average and median outcome clearly favored stocks over bonds. Over the next 180 days, stocks beat bonds by an average of 10.43%.

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STUDY THREE: MONTHLY

Since TLT closed above the upper monthly Bollinger Band on May 31, 2019, we can still learn something by examining similar monthly closes in TLT/VUSTX history. The less restrictive criteria brings the number of historical cases to 51. Once again, the results are similar; average and median outcomes, along with the percent of positive outcomes, clearly favored stocks over bonds looking out between 30 days and 2 years.

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Over the next 180 days, stocks beat bonds by an average of 7.15%, with 80% of stock cases resulting in green figures; bonds only posted green results in 57% of the cases.

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RARE FUNDAMENTAL ISSUES NOT UNIQUE TO 2019

The trade war and tariffs are legitimate concerns in 2019. However, every historical case cited featured a unique set of fundamental and technical concerns; otherwise, the bond market would not have reached such a rare and extended state.

DOES ANY OTHER EVIDENCE ALIGN WITH THE EXTENDED BOND MARKET?

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Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit ...

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