Warning: Bond Market Vigilantes Are Coming to Collect

After spending the spring and summer lulling just about everyone back to sleep, no one could be faulted for forgetting about the spike in rates last winter which coincided with a sharp correction in growth stocks as high multiple names finally faced some type of scrutiny form the marketplace. 

However, when we gauge the TLT weekly chart (below), ETF for Treasury prices (meaning inverse to rates, so as this chart goes down, rates go up, and vice versa), a colorable argument can be made that the bounce since the spring was nothing more than a new bear market rally, ripe to roll back over into autumn. Note, for instance, how TLT failed to renature some of the broken support price levels from 2020's slide. This type of all-sizzle-no-steak (meaning the rally did not accomplish much technically) grinding, rolling, strung-out rally is often the hallmark of a bear market bounce destined to fail miserably. I am now betting as such, taking a TLT bearish bet earlier this morning with Members. 

One of the more popular takes right now is that if economic growth slows back down, as is perhaps occurring now with the very weak jobs number this morning alongside some signs that leisure travel is slowing down, too, that rates necessarily must sink back down and TLT will rally.

I disagree with that viewpoint, as I think rates are in the unique spot of rising whether or not we see economic growth.

No, the issue with rates is much more about a long-term regime change underway, with the forty-year Reaganomics supply side cycle transitioning into a demand side extravaganza. In other words, I think we are in the infancy stage of a new inflationary regime, and whether we see slowdowns in growth or not, unfortunately, will not be as significant going forward as many would think. 

And with that, the bond market vigilantes should reappear soon enough to check a free-spending Congress, a clueless, reckless, and arrogant Fed, and mostly to begin to price in the regime change from supply side to demand side.