The beginning of 2022 has seen major volatility in the markets. In this article The Traveling Trader once again shines the spotlight on what trends to watch for that can have a huge impact on stock prices. The Traveling Trader’s technical analysis has been well received by his large YouTube following and Patreon Community where he commits to providing the highest quality content regarding trading strategies and market trends. His 4,000 strong Discord Group receives market alerts and discusses trades on a daily basis.
In this article The Traveling Trader discusses the Bond Yield moving ever closer to the 2% mark and the implications to the stock market if that happens. The last time this happened was back in 2015 when the Feds started raising interest rates for the first time since the financial crash of 2008.
The Traveling Trader comments that when Bond Yields go above 2% that’s a clear indicator that a Bear market is looming. It has been 43 years since there have been two consecutive years of losses in Bond prices. Bond Yields are different to Bond prices. When Yields go up Bond prices go down and vice-versa, yields go down Bond prices go up.
The 10-year Treasury Yield is the barometer used as the litmus test for what is to come in the markets as well as the economy. This 10-year Yield, The Traveling Trader reveals is the benchmark term as it is the middle area of yield timespans. With the yield currently at 1.85% and the Feds making an interest rate announcement on January 26, 2022 we could witness the Treasury Yield hit the 2% rate. The Feds have indicated ramping up interest rate hikes, with 4 planned in 2022. The Traveling Trader suggests that the Feds may hold back somewhat on making all these hikes as they assess the impact it could have on both the Stock and Bond Markets.
Stocks and Bonds are competing asset classes. The Traveling Trader reminds investors when stock prices dip and even more so when a correction takes place – the NASDAQ states that a correction occurs when there is a 10% or greater drop in financial markets – lots of investors bail out and flood into Bonds. The Bond Market is actually much larger than the stock market.
A 10-year Yield of 2% or more will, in The Traveling Trader’s opinion, force stock prices to go down even further. There are many options available for an investor to hedge their portfolios The Traveling Trader adds, such as Dollar Cost Averaging, a strategy designed for long term investors, Puts as insurance and Vertical Spreads etc. This information can be found in greater detail by viewing The Traveling Trader YouTube video.
The Traveling Trader encourages investors to complete their own due diligence before making any trades and states that this information is meant for educational purposes only, he is not a financial advisor.
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