My mentor Sir John Templeton (founder of the Templeton Funds) used to say that the four most dangerous words in investing are, “It’s different this time!”
The chart below looks at the long-term S&P 500 and the yield on the 10-year note (inverted to mimic bond prices).
The S&P 500 has been inside of a rising channel for the past 15 years. The yield on the 10-year note has also been inside of a 15-year rising channel. One thing that is certainly different this time is the fact that stocks are at the top of the channel while inverted bond yields are at the polar opposite.
However from a sentiment perspective, there are a few differences between the two at this point. As the S&P tests the top of this long-term rising channel at (1), consumer confidence has just surpassed the highs reached at the 2007 peak. On the flip side, as bonds are testing rising support at (2), bullish sentiment on the 10-year note according to Sentimentrader.com stands at “0% bulls.”
Will it be different this time, in that stocks can break above their long-term rising channel amid healthy consumer sentiment?
Will it be different this time, in that bonds will breakdown from this long-term rising channel with 0% bulls?
Will it be different this time? From a global-growth story, it would be nice to see stocks break out due to growth while yields break support.