By Michael Keane
Recently, both equities and stocks have gone up. This is not normally the case. But realistically, this is not a normal market. Both the S&P (up over 17%) and the bond ETF TLT (up over 8%) are up for the year. We believe the main two culprits are new money being invested during a time that the Fed has yet to unwind its bond portfolio.
The main reason we are leaning toward is the thought that we are now seeing an effect of how propped up the bond market is by the Fed, which is worrying. With the tax bill debt increase, along with the Fed planning to unwind a portion of their bond portfolio, bond ETF’s like TLT could be in real danger of not just a decrease in price, but an actual crash.
New money is also being invested and it is being done so in an allocation method. Putting that on top of the Fed purchases, bonds are probably higher than they should be.
Per disclosure, our partner KDK Options has had, but does not currently have any positions of either SPY or TLT.
Don’t forget to like us on Facebook, Twitter, and Stocktwits!
**All
posts on this blog are information and opinions only. They are not to
be considered recommendations to buy or sell any security. Please do
your due diligence first before trading and investing. Please direct all
questions and comments to the blog or to kdkfund@gmail.com or on
twitter @kdkfund.
