It’s important for investors to follow stocks and bonds. And even more important to understand the relationship between them.
Today, we highlight the past 20-years of there relationship via the S&P 500 Index to $TLT (long-term treasury bonds ETF) price ratio.
In general, the stock market is doing well when stocks out-perform bonds (ratio heading higher) and worse when bonds are stronger (ratio heading lower).
The chart below is a long-term “monthly” chart of this ratio. Here we can see that the Stock/Bond ratio has been in a broad up-trend for 20 years, and a very sharp and narrow up-trend for the past 4 years.
BUT, the ratio is currently testing important price support within its narrow up-trend.
And with RSI posting its highest levels in 20 years, this support test becomes more important! Should this ratio break down, we will likely see a deeper stock market correction. Stay tuned in the month(s) ahead!
S&P 500 Index / $TLT Treasury Bonds ETF “monthly” Ratio Chart
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The author may have a position in mentioned securities. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
