Thursday, September 15, 2016 8:14:29 PM
Revisiting the 2013 Taper Tantrum BY ART HILL
Many analysts are comparing the current market decline with the taper tantrum so I thought it would be a good time to looks at the key charts then and now. The first chart shows the S&P 500 and the 30-yr T-Yield ($UST30Y) in 2013. The taper tantrum occurred on May 21st when Fed Chairman Bernanke suggested a "tapering" of monetary policy. The 30-yr yield has already bounced the first three weeks of May and extended its gains into August. Overall, the yield moved from 2.8% to 3.8%, which is a HUGE move
The S&P 500 fell sharply from mid May to late June with a 7.5% decline from high to low. This decline started right when Bernanke suggested tapering. The decline broke the 50-day EMA and may have seemed drastic at the time, but the index was clearly entitled to a pullback after a 20% advance. Notice that the index did not break the April lows and did not test the 200-day EMA. This "tantrum" turned out to be a fairly normal correction as the S&P 500 bottomed in late June and resumed its zigzag advance the rest of the year. The 30-yr yield held near 3.8%, but this DID NOT deter the S&P 500. Moral of the story: Correlation is not the same as causation. Watch the S&P 500 if you are interested in stocks and the 30-yr T-yield if you are interested in bonds.
Many analysts are comparing the current market decline with the taper tantrum so I thought it would be a good time to looks at the key charts then and now. The first chart shows the S&P 500 and the 30-yr T-Yield ($UST30Y) in 2013. The taper tantrum occurred on May 21st when Fed Chairman Bernanke suggested a "tapering" of monetary policy. The 30-yr yield has already bounced the first three weeks of May and extended its gains into August. Overall, the yield moved from 2.8% to 3.8%, which is a HUGE move
The S&P 500 fell sharply from mid May to late June with a 7.5% decline from high to low. This decline started right when Bernanke suggested tapering. The decline broke the 50-day EMA and may have seemed drastic at the time, but the index was clearly entitled to a pullback after a 20% advance. Notice that the index did not break the April lows and did not test the 200-day EMA. This "tantrum" turned out to be a fairly normal correction as the S&P 500 bottomed in late June and resumed its zigzag advance the rest of the year. The 30-yr yield held near 3.8%, but this DID NOT deter the S&P 500. Moral of the story: Correlation is not the same as causation. Watch the S&P 500 if you are interested in stocks and the 30-yr T-yield if you are interested in bonds.
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