“One of the most striking features of 2014 has been falling Treasury yields in the wake of the Fed’s tapering of QE. The standard theory goes that, as the Fed withdraws support for longer-dated bonds, bond prices will drop (as demand falls) and yields (which move inversely to prices) will rise. So much for standard theory… In addition to the divergence between large caps and small caps (which we wrote about here and here), the divergence between falling bond yields and rising large-cap stock prices is another sign that the rally in the S&P 500 and the Dow may not be as strong as some believe.”
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