I think this is an important issue to follow, and Barron’s has an article discussing this very topic. As I mentioned in my previous post, the bond market and stock market are telling us two different stories. The bond market sees an economic downturn while the stock market calls for clear skies ahead. Usually, the bond market wins out as it is three times larger than the stock market. Santoli, the author of the Barron’s piece, calls the stock market “the bond market’s idiot kid brother.”
The other point to the article that caught my eye was Santoli’s comparison to the Dow Jones Industrial Average dividend yield, currently 2.65%, compared to the 10 year Treasury bond, which is around 2.7%. The only time in the past 50 years where the Dow’s dividend yield was above the 10 year was in late 2008 and early 2009 when the economy was in the tanker. Investors beware.