06.12.22 | Looking at Structural Issues Related to the Onset of a Secular Bear Market

Yields on the 10-year Treasury Inflation-Protected Securities (TIPS)

Yields on the 10-year TIPS are known as “real yields” because they subtract projected inflation from the nominal yield on Treasury securities. Prior to April 29, negative yields meant investors would lose money when buying a 10-yr Treasury note, adjusted for inflation.

Equity Risk Premium Shrinks as 10-Year TIPS Yields Rise

As real yields turned positive, equity risk premium declined, making it less attractive to own equities.

As monetary policy tightens, real yields are likely to rise further. (Real 10-year yields are the risk-free alternative to owning stocks.)

Rising Commodity Prices A Leading Indicator for Secular Bear Markets

“Commodities take the lead during inflationary periods.   Within the CRB Spot Raw Industrials, long-term bullish signals have triggered in corn, wheat, oats, cotton, copper, palladium, gold, silver, and oil.” [Source: Martin Pring]