Steve Donzé

Fed mid-cycle tightenings are rare birds. One example is March 1997, which fared much better than classic, end-cycle tightenings.

Opportunities to locking in real yield at or above GDP potential growth rate? Once per decade.

Positive SPX–10Yr Yield correlation has prevailed near 4%–5% . . . . . . but relationship has typically been negative at 10Yr Yields well above 5% This is a trajectory plot of the rolling correlation between S&P 500 moves and 10-year Treasury yield moves, shown against the level of the 10-year yield itself, from June 1985 to 25 September 2026. The path traces how the stock–yield relationship has changed as the yield level has changed. Positive correlation means stocks and yields have been moving in the same direction (a growth or “good news is good news” regime). Negative correlation means they have been moving opposite each other (rising yields acting as a valuation or tightening headwind, or falling yields supporting equities). Two regimes stand out on the chart. Around 4–5%, observations cluster in positive-correlation territory (roughly +0.4 to +0.9). That is the zone that has prevailed for much of the period since yields rose out of the post-GFC lows. Equities have often been able to advance even while the 10-year stayed elevated or moved higher. Well above 5%—the large cloud stretching from about 5.5% to 11%—the correlation has typically been negative. That cloud is dominated by the 1980s–2000s, when a long decline in yields coincided with a long equity bull market. In that environment, falling yields and rising stocks produced negative co-movement. The 25 September 2026 observation sits in the positive-correlation cluster, just left of the 5% line. That is consistent with the recent pattern FinTwit has been highlighting: near current yield levels the co-movement has still been positive. The chart does not say yields above 5% automatically produce a rising S&P 500. It says the sign of the correlation has historically differed by yield zone. If the reading stays positive, modest further increases in the 10-year need not immediately cap equities. A sustained flip into negative territory would mean rising yields had become a more direct headwind. @chris_robb1 @fundstrat @robin_j_brooks @DannyDayan5 @AlanLongbon @CestrianInc @jfozak @steve_donze

16TN in wealth gains YTD, and nearly 30TN or 100% of GDP since beginning of 2025. Fed has a tough job ahead. This is monetary policy, whether people want to admit it or not.

I think the idea that Treasury buybacks were "ineffective" is misplaced. 10s30s are significantly flatter. Swap spreads are ~10bps wider. In absolute yield terms, rates are driven by growth, fiscal trajectory, and central bank policy. But issuance shifts are certainly "effective".