Smart money is beginning to notice a divergence that will spell major trouble for the stock market. First, interest rates are spiking dramatically higher. The 10 year yield is trading at 2.12%. This is a gain of 5% on the day and the highest level in over a year. Next, it must be noted that this is still a deflationary environment. Even with the Federal Reserve printing all this money, deflation is still out and about. What does this all mean? Problems for the Federal Reserve. The Federal Reserve fears deflation. Yet now interest rates are starting to rise. The higher interest rates go, the less the Federal Reserve can print and the more expensive debt becomes. Trouble is brewing and the bond market is telling us of a tricky, rough outcome that the Federal Reserve did not see coming. Ultimately, when rates rise, the Federal Reserve will not be able to do much. When it is over, it's over.
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com
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