Something unusual is happening in financial markets, and it could mean more gains lie ahead for stocks, if history is any indication.
The S&P 500 and long-term bonds are both up more than 5% to start off 2019, marking just the 10th time since 1980 that stocks and bonds kicked off a year on such a strong note, according to data from Bespoke Investment Group. The data also shows the S&P 500 averages a gain of 11.3% when stocks and bonds get off to such a hot start.
Sharp gains in both equities and fixed income are unusual since rising bond prices — or declining yields — are usually seen as a signal that an economic slowdown looms ahead. Bonds are seen as a safe haven in times of economic turmoil. Stocks, meanwhile, usually produce much higher returns than bonds when the economy runs smoothly.
That’s why they usually don’t trade together.
“While the relationship between the performance of equities and US treasuries has changed over time … positive equity performance has coincided with weaker performance in treasuries and vice versa,” Bespoke said in a note Monday. “This year has bucked that trend.”