Bonds To Keep Weakening Until Stocks Tank | Bill Fleckenstein
Bill thinks the odds of a "tanking" in stocks are "very high" in 2025
Today's guest has long warned that the bond market will one day take the printing press away from the Federal Reserve.
Well, the Fed has CUT its policy rate by 100 basis points since September, but the yield on the 10 year US Treasury note is now 100 basis point HIGHER since then.
This has flummoxed many investors and mortgage holders. Yet it begs the question:
Is this the start of a bond market revolt against the Fed?
To find out, we're fortunate to welcome back to the program analyst Bill Fleckenstein of Fleckenstein Capital.
Bill predicts the bond market will keep falling until stocks tank.
To learn why, click here or on the video below:
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Adam’s Notes: Bill Fleckenstein (recorded 1.7.25)
EXECUTIVE SUMMARY:
The Federal Reserve has cut its policy rate by 100 basis points since September 2024, yet the 10-year U.S. Treasury yield has increased by the same margin. This divergence between policy rates and bond yields highlights what Bill describes as a potential "bond market revolt," signaling a growing lack of trust in the Federal Reserve's strategies. This dynamic poses significant risks to the central bank's ability to maintain control over economic stability.
The global economy is characterized by persistent stagflation, where inflation remains elevated while economic growth stagnates. In the United States, the fiscal deficit exceeds $1.5 trillion, while the federal debt has surpassed $33 trillion. Internationally, China faces economic uncertainty, with unclear policy outcomes, while Europe struggles with slow growth and looming political instability. Bill suggests that these global conditions offer little cause for optimism in the near term.
The stock market shows significant overvaluation, with the S&P 500's cyclically adjusted price-to-earnings (CAPE) ratio reaching 38x earnings, levels seen only during the dot-com bubble. The Buffett Indicator, which compares total U.S. market capitalization to GDP, is at an all-time high. Moreover, market performance is heavily reliant on just 10 mega-cap stocks, creating a precarious concentration risk. Bill warns that
