S & P 500, Dow and Nasdaq rose Tuesday when investors decided it was too early to worry about withdrawing – even though bond yields are still depressed.
"We still have some running time," said Brad McMillan, Chief Investment Officer of the Commonwealth Financial Network. The shares collect, he added, "can last a while."
Stocks and bond yields have moved in different directions for several months, sending conflicting signals to investors looking for warning signs to slow global growth. S & P 500 has jumped 19% since the decline in December, while the return on the benchmark 10-year government bond has declined. Investors usually see falling bond yields as a sign of economic pessimism, as it points to increased demand for a haven.
Their primary reason is that a partial yield curve inversion – and it has since narrowed – does not mean that a recession will strike immediately.
When the curve alternates, the average period to the next decline is 27 months, according to a report by the Bank of America Merrill Lynch Global Research this week. The area has varied between nine and 66 months.