We have discussed extensively characterizing this financial market as unprecedented. The bull market for bonds ended in March 2020 and all that was left was for stocks to finish their bull market run as well. This happened at the beginning of this year as we began to see unprecedented market moves in February 2022.

It is not surprising that last year was one for the ages for asset prices. One did not need to believe the bond bull market was over to enjoy a nice run up in private equity investments. Interest rates were still incredibly low allowing private equity, or leveraged equity, to trounce the performance of other asset classes. The S&P Listed Private Equity Index began 2021 at 168, hitting a high of 240 in November 2021 (per Bloomberg).

The bond bull market is over, and this is where you need to think differently. First and foremost is the lost ability to sell at worthwhile prices. Those private equity investments that performed so well in 2021, well, let’s just say they’re giving it all back in 2022 as the S&P Listed Private Equity Index recently printed below 150.

What about those other inflation fighting alternative investments? Real estate investments do not work as well with higher interest rates. Good thing you locked your rate in…except that will not help the investors you would like to sell to. In a bond bear market liquidity tends to go poof, sometimes overnight.

Bitcoin, gold, and even oil has seen their gains of last year reverse almost entirely. If you are beginning to think there is no place to hide you would be thinking in the right direction.

The sideways moves in financial markets these past few months has provided a respite from the unprecedented moves experienced in the first half of this year. A sideways move, also known as a correction, can confound market participants particularly traders and speculators who are generally trend followers.

Bond watchers should know the trend by now as bellwether interest rates on the ten-year U.S. Treasury note climbed from a low of 0.31% on March 9^th, 2020 (prices/yields per Bloomberg) to 3.50% on June 14^th, 2022. Those yields equate to a price of 111-19 in 2020 on the ten-year 1.50% U.S. treasury note due February 15, 2030, and 86-14 in June, for a loss of over 25 points.

The summer sideways action saw bond prices rally with the bellwether treasury note trading at 93-03 on August 2^nd or 2.50% for a nice, quick one hundred basis point correction over about six weeks for a six-plus point gain…but now sideways is over. This week the yield on the ten-year note is now back over 3% (3.11% as of August 25^th).

The trading action of the bellwether ten-year note is instructive because this is how corrections work. Yes, the 3.50% level in June was a new high for the cycle but it also a new high dating back 11 years! The ensuing correction was swift (so far, a matter of weeks), but it does not change the trend.

The current question for bonds is whether the correction (sideways action) continues for a few more months or whether bonds hit new higher interest rates (new lower prices) in the coming weeks.

Markets, even in the unprecedented moves of this year, do not move in straight lines. A trending market will move, move, move and then, suddenly, seemingly, will move in the opposite direction.

This is how markets move and lately it has been sideways. For bonds, we might watch the US treasury ten year note yield. On June 14^th the yield hit a new high yield of 3.50% (all yields/prices per Bloomberg) which also means it was a new low for price. It was a new high for yield (low for price) that had not been seen since 2011. The opposite, seemingly, of the low yield (0.31%) and high price extreme of March 2020, the end of the bond bull market. And yet, over the following days, yields suddenly reversed course, plunging to 2.74% on July 6^th. It has been sideways since.

I bring this up because stocks, suffering an unprecedented decline this year, hit their low on June 17^th with the S&P 500 Index hitting 3637, a steady decline from the 4818 high of January 4, 2022, for down 24%. The decline has ended, seemingly, and since June 17^th stocks bounced. It has been sideways since.

In a downward trending market, the type of market bonds and stocks now find themselves, corrections are upward moves in price. Lately we are not marking new price lows in these markets; we are moving sideways. This period is a correction of the new downward trends for bonds and stocks.

Corrections can confound traders. Suddenly, their trades are not working for them, but instead the trades are working against them. It is a gut check: continue with the trade in the hopes the correction is temporary or reverse their trade and risk a whipsaw effect.

Asset prices continue to evaporate. The cryptocurrency assets, led by Bitcoin, have lost over $2 trillion since its peak in November according to Coin Gecko back on June 12^th. The Big Tech names of FAANG stocks (Meta, Apple, Amazon, Netflix, and Alphabet) along with Microsoft have collective losses of $3.3 trillion this year per S&Ps June 13^th report. For context, the entire municipal bond market totals only $4 trillion (Bloomberg).

Whether stocks, bonds (Bloomberg’s U.S. Treasury index is down over 10% year to date, June 24^th) or crypto your portfolio is hurting. Inflation, by any measure, is taking a toll on your wallet. There seems to be nowhere to hide.

Listening to the experts, the ones who manage trillions and spend billions on advertising, and you will hear the familiar refrain, just hang in there. This is great advice for them as they continue to collect billions of dollars in fees managing your money.

This is your money. If you want to keep it, you might need to do something about that. We have seen asset prices evaporate. Will that continue? And what if it does? With inflation surging, what are the alternatives?

Another down week on Wall Street but who is counting? Obviously, everyone because we know that number to now be six, as in six weeks. But I digress as I am a bond guy so let me keep on task. Another down week for bonds, all told close to 110 now since the top in bond prices, but who is counting… besides me?

This week we set new lows in price for the bellwether ten-year and thirty-year U.S. Treasury note and bond. Now those unprecedented year to date bond returns we saw last month are even more unprecedented. The worst ever start for US treasuries is beginning to be felt in other markets.

Thus far market prices have simply evaporated. Some call this orderly; others call it a reset. Stock prices for companies that were formerly considered home runs (think Peloton, PTON) have now retraced all their home run up. From a $18 low in March 2020 to $171 in January 2021 and below $12 last week (per Bloomberg), PTON does not stand alone with this chart. You can find other stocks and ETFs have similar looking charts. There is a lesson here: only sell the stocks you want to record a gain because later you might not have one.

But back to bonds. Unlike stocks, where values are created or destroyed based on the share price of the last share traded, bond prices can evaporate without any such trading. Think about that. And think about it some more because, in my opinion, it is bond pricing that is wreaking havoc with asset prices.