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Stocks, Bitcoin and Ether tumble as bond yields spike

September 28, 2021, 9:34 AM UTC

Good morning.

It feels a lot like last February when the reflation trade was in full swing. Bond yields are climbing, along with energy prices. And that’s sending tech bulls running for cover. On cue, Nasdaq futures are underperforming the pack.

Crypto is faring even worse. Bitcoin has been trading lower throughout the morning, as has Ether.

I’m feeling pretty bullish, personally. I started the day with an everything bagel—my first in more than two years. (A friend and his wife, visiting from New York yesterday evening, smuggled one in.)

Speaking of everything…let’s check out what else is moving the markets.

Markets update


  • The Asian markets are mixed with the Nikkei down nearly 0.2%. Hong Kong’s Hang Seng is up 1.2%.
  • Goldman Sachs is cutting its growth projections for China as the country’s worrying energy crunch worsens.
  • It’s not just China. The threat of energy shortages going global is pushing up crude prices everywhere. Brent just crossed the $80/barrel threshold this morning, a three-year high.


  • The European bourses are under pressure on Tuesday, with the Stoxx Europe 600 down 0.9% in early trading. Energy leads the way higher.
  • Royal Dutch Shell and TotalEnergies are trading 2% higher in the first hour of trading, helped by rising crude prices.
  • Watch rising global bond yields. They spiked in Germany and the United Kingdom yesterday to an eight- and 13-year-high, respectively, as investors bet inflation will 🚀. In Britain (and elsewhere), rising fuel prices will push inflation rates to ever higher levels.


  • U.S. futures have been trading lower all morning. That’s after the Nasdaq underperformed the pack on Monday, hit hard by rising bond yields and real interest rates. Tech futures lag again this morning.
  • While tech stocks took it on the chin yesterday, which sectors outperformed? Yep, energy and financials, both of which are on a five-day tear.
  • All eyes are on Washington as we’re under 72 hours away from a potential government shutdown—that’s if Congress cannot reach an agreement on a new spending plan. Here’s what happens in case of a shutdown.


  • Gold is down, trading around $1,740/ounce.
  • The dollar is up, trading near a YTD high against the euro.
  • Brent is gaining, trading above $80/barrel—up more than 8% in the past week.
  • Crypto is under pressure this morning. Bitcoin tumbled more than 4% to trade below $42,000. Ethereum’s Ether, too, dipped to slide below $3,000.


Reflation nation

Yesterday, before the opening bell in New York, I got a note from BofA Securities saying, look out for the next big resistance point in bond yields at 1.50%. We blew through that a few hours later.

This morning, the closely watched yield on the 10-year Treasury note sat at 1.54%, a three-month high. It’s jumped 23 basis points in the past week alone to break out of its 100-day moving average. That’s a big jump.

Is 1.54% high? Well, no, not historically. But whenever we get spikes like this, it means investors are betting we’ll see higher interest rates in the future. The way to measure this is to look at the spread between the short-dated (2-year Treasuries) and longer-dated notes (10-year). According to the Saint Louis Fed, the spread is at a high last seen in early July, and it’s trending to go up further from there.

So, it’s not the size of the move, but the trend line. Most on Wall Street concur that Treasury yields will pop even further, with BofA projecting we will see the 10-year top 1.8% by year-end.

So, if Wall Street is right, that we’re heading into a reflationary stretch, what does this mean for your portfolio?

For starters, the trade for Q4 could look a lot like the prevailing Q1 trade: that is, rotating out of growth (tech) stocks and into value (financials) stocks. After all, the big reason value stocks lost their oomph by late spring was not some giant shift in fundamentals. It was the rise of Delta.

You could call this the start of a reflation trade, or the resumption of the one we started in January.


Bernhard Warner

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Today's read

SEC chair Gensler worried ‘people will be hurt’ without crypto and SPAC regulationsFortune

Treasury yields rise amid expectations of ‘stickier’ inflationFortune

As panic buying strikes, the U.K. calls on soldiers and foreign workers to restore orderFortune

China Power Outages Pose New Threat to Supplies of Chips and Other GoodsWall Street Journal

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Market candy

Quote of the day

The stock market increasingly indicates that the U.S. economy has entered another reopening cycle.

Reflation. Rotational. Reopening (or, maybe, a re-reopening). You're likely to hear those terms a lot ahead of the term "trade" in the coming days. Yesterday, Leuthold Group chief investment strategist Jim Paulsen told CNBC that investors are reevaluting their tech-heavy portfolios in favor of stocks that reflect a world of rising prices, rising bond yields, and rising real interest rates.


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