This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking about the markets with Gary Shilling, president of A. Gary Shilling & Co.
A bull on long-dated Treasurys since 1981, Shilling remains so today, not scared away by a 30-year yield at just above 1%. Helped along by very narrow number of names, the S&P 500 is at a record-high, but the economic scene remains quite troubling, says Shilling. What the bond market really cares about, he says, is inflation, and the spread between the 10-year TIPs and 10-year Treasury yields recently narrowed to just 50 basis points, suggesting investors expect nearly no inflation over the next decade. He’s telling clients to buy long-dated Treasurys, whether in cash form, ETFs like the iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT), or futures contracts at the CME.
As for what bonds might be saying about stocks, Shilling notes that yields this year began falling on January 2, but equities didn’t pay attention until mid-late February. He’s seeing something similar afoot this summer, with the 10-year yield falling from 0.90% in early June to the current 0.64%. Should equities begin paying attention again, the S&P 500 could be set up to fall 30%-40%.
There’s plenty more, including what Fed Chairman Jay Powell might say at Jackson Hole this week and what could get Shilling to change his mind, and instead position himself for sharply higher inflation.
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