The Bond Market Just Flashed a Rare Warning Seen Twice in 20 Years. History Says the Stock Market Will Do This Next.
History says the S&P 500 and Nasdaq Composite could be headed for a correction.
Overview
The U.S. stock market has posted solid returns this year despite battling economic uncertainty created by President Donald Trump's policies. Year to date, the broad-based S&P 500 (SNPINDEX: ^GSPC) index has advanced 12% and the technology-heavy Nasdaq Composite (NASDAQINDEX: ^IXIC) index has added 13%.
Despite strong corporate earnings in the first and second quarters, surveys conducted by the American Association of Individual Investors indicate that bearish sentiment has increased significantly since January. In particular, investors are anxious about inflation, government debt levels, and heavy spending on artificial intelligence.
Details
The bond market, fueled by those concerns, just flashed a warning sign last seen about two decades ago. The 30-year Treasury bond yielded 5.31% when the market closed on Aug. 17, the most since June 2007. Last time 30-year Treasuries paid that much, the S&P 500 and Nasdaq Composite dropped into correction territory during the next year.
Source
Originally published at www.fool.com.