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Bond rally suggests stock markets' rebound may soon fade: WSJ

Feb. 04, 2019 9:55 AM ETBy: Liz Kiesche, SA News Editor1 Comment
  • It's unusual that both U.S. stocks and bonds rise at the same time--that may have some investors worried that January's stock market rally is destined for a reversal.
  • While major stock indexes rebounded in January, the best first month of the year since the 1980s, falling yields on shorter- and longer-term government debt usually signifies increasing pessimism for the U.S. economic outlook.
  • Most economists don't see an imminent recession--a Wall Street Journal survey estimates U.S. GDP growth of 2.2% annual rate this year. But as tax reform effects fade and the global economic outlook dims, there's not a lot to suggest economic growth will improve.
  • "The question for stock markets is: Are we bouncing back from oversold levels in December, or is it an actual rally?” says Darrell Cronk, president of the Wells Fargo Investment Institute.
  • One factor bolstering the stock market is the expectation that the Fed will pause interest rate hikes for awhile.
  • A force that's weighed on the U.S. stock markets, though, is the slowdown in the world's second-largest economy, China. To make further gains, there needs to be evidence that trade talks with China are making progress, says Art Hogan, chief market strategist at National Holdings, an asset management firm.

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