10 Year T-Note yields skyrocketed today by nearly 5%, as investors realized the statistical aberration of falling yields and rising stock market prices. Those who were risk averse due to the fallout from Brexit have seen the rising prices in US markets and finally moved their money into the stock market and out of the bond market over the weekend, causing a lower demand for bonds, lower bond prices, and higher yields.
The Dow was moderately up by 0.44% as confidence is restored in Britain. Previous uncertainty about British leadership has cleared over the weekend, according to the WSJ, causing the British FTSE 250 to rise by a whopping 3.4% today. The positive correlation between British and US stocks led to a smaller positive move domestically.
As Brexit’s impact on the market subsides, the stock market will be most affected by domestic news, including bank earnings and other corporate profit reports for the second quarter. Today, the S&P 500 set another record high of 2136.92. Volatility as measured by the VIX is at a low level of 13.54, suggesting that the stock market trends described above have been caused by a reduction in fears, and less by positive news, meaning that there is still upside potential domestically based on earnings.