Something unusual is happening in financial markets and it could mean more gains lie ahead for stocks, if history is any indication.
time since 1980 that stocks and bonds kicked off a year on such a strong note, according to data from Bespoke Investment Group. The data also shows the S&P 500 averages a gain of 11.3% when stocks and bonds get off to such a hot start.
Sharp gains in both equities and fixed income are unusual since rising bond prices — or declining yields — are usually seen as a signal that an economic slowdown looms ahead. Bonds are seen as a safe haven in times of economic turmoil. Stocks, meanwhile, usually produce much higher returns than bonds when the economy runs smoothly.
The Fed came into 2019 expecting to raise rates twice before bringing that forecast to zero. Now, investors are expecting the Fed to start cutting rates as early as next month after the Fed said last week it is ready to "act as appropriate" to sustain the current economic expansion.Bonds have risen all year "despite a stock market which continues to trend higher.
The trade war could also be influencing the correlation between the two markets. Stocks are still holding out hope there will be a trade deal, while bonds are reflecting the damage already wrought by the tariffs in place, and perhaps a greater fear an agreement may take longer to hatch.
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