economy

Here's Todd Gordon's case for why this stock market breakout is not an August head fake and is likely to continue higher

Failure of Treasury yields to push higher should open the door for continued gains in equities.

Here's Todd Gordon's case for why this stock market breakout is not an August head fake and is likely to continue higher

TL;DR

  • The stock market has been in an indecisive range since mid-May due to geopolitical tensions, inflation, AI capex concerns, and a software meltdown.
  • A primary concern is the potential for a Federal Funds rate hike driven by persistent inflation, though Fed funds futures odds have decreased.
  • The article argues that the 2-year Treasury yield, which tends to lead the Fed funds rate, is not yet at a level historically associated with forced Fed rate hikes.
  • Past instances of the Fed raising rates after periods of flat or declining rates show a significantly wider spread between the 2-year Treasury yield and Fed funds than currently observed.
  • The author, Todd Gordon, believes rates are unlikely to go higher, supporting the idea that the current stock market breakout is sustainable.

Continue reading the original article