The bond market is making historic moves.
The yield curve between the U.S. 10-year note and 2-year note is its most flat since 2007, just points away from an inversion, while the 30-year yield has plummeted to all-time lows.
Falling yields, which move inversely to prices, suggest investors are flocking to safe haven assets such as the Treasury market on fears of a slowdown in economic growth.
Oppenheimer’s head of technical analysis, Ari Wald, said the 10-year Treasury yield is now its most oversold in eight years. However, he sees this as a buy signal for stocks, rather than a signal to flee.
“The stock-bond relationship has changed through time but historically speaking going back to data from 1963 such oversold conditions in terms of interest rates has been followed by above-average returns looking at the S&P 500,” Wald said. “We do think that the depleted level of interest rates has made equity prices relatively attractive.”
It’s not a broad-based buy signal, though, he adds, noting it pays to be selective.
“Looking underneath the surface, especially at the global landscape, you do have much more mixed performance so I think selection is still the key,” Wald said. “For us, U.S. large-cap growth I think sets up very well here.”
The IVW S&P 500 growth ETF has rallied 19% this year, better than the 15% gain by the