So, not even bonds matter? Today the bond market is getting trounced, absolutely crushed by the one-two punch of increased personal spending and a robust purchasing managers' report. With my bond futures down almost 2 full points, I keep waiting for the bond-future-selling to spill over the stock futures, as it has every time since 1984. Instead, the stocks are moving on up.
Talk about new paradigm. The problem isn't that the weak bonds aren't carrying over the
. The problem is that that S&P isn't what it once was. The S&P is now massively overweighted in tech, and arguably, a strong purchasing managers' report may mean GOOD things for tech, certainly better than a weaker report. Lo and behold, the market is no longer counterintuitive. The old patterns don't hold true.
For the longest time when we spoke of the market, we spoke of
. But these days, the "market" is
. The latter benefit from a strong economy. Sure enough, the companies that benefit from a weak economy, the ones more correlated with bonds because their earnings are less cyclical, aren't doing much of anything today, and PG and PEP are both down. It looks like the days when the S&P catches pneumonia when the bonds have a cold seem, at last, to be behind us. That said, I am sure there is a level where genuine asset allocation out of stocks into bonds would occur. But 5.18%, where the bonds are now, is nowhere near where that happens. Must be much higher in yield to make that happen.
I hate ever to disregard the bonds. The first thing I learned when I walked into
16 years ago was "ignore the bonds at your own peril." However, when I started at Goldman, our economy was
and movie companies. Now it is tech. To not acknowledge that change is to run the risk of bailing out of winning stocks that don't go down anymore when the bonds get shellacked.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At the time of publication, his fund was long Dell and Cisco. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column by sending an email to email@example.com.