Trump carnage in bonds spells trouble for stocks

By Mark DeCambre

Stocks have stormed to record levels on the back of hope that President-elect Donald Trump can make not just America great again, but the stock market as well. But a jarring selloff in bonds is a bad sign for Wall Street and could mean problems for equities, at least in the short term, strategists warn.

John Kosar at Asbury Research told MarketWatch that he doesn’t see Treasurys putting in a bottom yet, but he thinks the breaking point for U.S. government paper is nearing, which could mean a slump in stocks (see chart below).

“There may be another shoe to drop in the stock market,” Kosar said, adding that he sees 10-year yields possibly heading back to 2% in the near term, implying that investors will move out of stocks and buy Treasurys at some point before the end of the year.

“Usually when the market is least expecting, it gets whacked. I think the likelihood of us making new all-time highs and staying there for the S&P 500 is not good,” he said. But he also sees signs that 2017 could be a good one for stock investors.

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