When up means down and down means up....

The 10 yr. US Treasury Bond hit a yield below 2% earlier this morning, the Dow Jones Average dropped as much as 525 points. Good or Bad?

The good news: Mortgage rates hit a 50 year low.

The bad news: Very few can get the loan.

In my opinion and experience, the bond market is usually right, meaning that, whatever direction the bond market goes, the rest tend to follow.

To be more specific, I am not saying that all of the markets move in the same direction at the same time, or in other words, that if the bond market starts to move higher, all other markets also move higher. Rather, what happens is that, whatever overall market and economic conditions that the bond market is predicting tend to be what really happens. And, based on this prediction, the various markets move according to how you would expect them to react to those market and economic conditions.

In layman's terms; bad news is good news for bond prices. As prices go up, yields (think interest rates) go down. But good news for bonds is bad news for most others. As the economic climate or other concerns increase, rates come down. Japan has had interest rates at or near 1% for nearly a decade.

Buckle up, it's getting rough out there.

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