There’s somethin’ happenin’ here

But what it is ain’t exactly clear

There’s a man with a gun over there

A-tellin’ me I got to beware

I think it’s time we stop

Children, what’s that sound?

Everybody look what going down

–Opening lyrics by Stephen Stills, performed by Buffalo Springfield

Stills wrote this song in late 1966 and it became a hit in 1967. According to Wikipedia, Stills “was inspired to write the song because of the Sunset Strip curfew riots in Los Angeles in November 1966.” That year saw the first substantial decline of the Go-Go stock market of the 1960s as stock prices had almost doubled from a 535 Dow Jones Industrial in 1962 to 995 in early 1966 (all prices/yields per Bloomberg). The correction that began in 1966 endured for over fifteen years until our forty-plus year stock bull market finally shattered the Dow 1000 level for good in 1982. Adjusting for inflation rampant in the 1970s, it took many more years than that to get back to the 1966 stock market high.

We have had our own riots of late, many associated with Black Lives Matter following the murder of George Floyd in 2020. But with stocks recovering from their 2020 Covid Correction to new highs in late 2021 and early 2022, we have generally seen relative calm. That was two years ago, making the latest stock correction sideways (so far), similar to the late 1960s. Somethin’ happenin’ here, But what it is ain’t exactly clear.

What is clear is bonds are taking a beating. Long term bonds have lost ten, twenty, thirty, forty and even over fifty-plus percent of their value since their 2020 price highs. Banks own trillions of dollars of underwater bonds, but don’t you worry. Here in the US banks can deem their bonds as long-term holdings so they don’t have to write off any losses against them. For the banks and those who invest in them, willingly or unwillingly, there is hope.