• The German bond’s 3% loss on a 12 basis point yield move shows how risky bonds are right now.
• The value of the S&P 500 should be around 1,600 but could go lower with bad economic news.
• Bonds and stocks seem very risky as they both have low yields and large downsides.

Introduction

Last Friday was a pretty scary day in the financial markets. The S&P 500 lost 2.45% and bonds also lost ground due to higher yields.

Stocks and bonds are correlated and don’t provide quality diversification. We have been warning about the risks inherent to bond investing for a while with warnings that the low yields mean high risk and low returns. More →