“The tie between 2-year yields and S&P 500 returns is mostly clear” over the past 16 months, Nicholas Colas, co-founder of DataTrek, said in a note Monday. “When rates are rising, the index drops. When rates stabilize, the S&P rallies.”“The tie between 2-year yields and S&P 500 returns is mostly clear” over the past 16 months, Nicholas Colas, co-founder of DataTrek, said in a note Monday. “When rates are rising, the index drops. When rates stabilize, the S&P rallies.
“Since 2-year Treasury yields reflect the market’s view of future Federal Reserve monetary policy, it is telling that their recent decline has had little effect on stock prices,” Colas said. “Even though fed funds futures are predicting rate cuts by the end of the year, equity markets are not quite sure if that’s good news or bad.”