Morning Notes — Ten-Year Bond Yields

Last week, we explained the importance of cyclical sector leadership for the health of any bull market. We noted that gains last week came on defensive sector leadership, which casts doubt on the sustainability of new highs. We wouldn’t add broad equity exposure until cyclical sectors make new highs. We continue to closely follow the SOX, DAX, NKY and MSCI World Auto Index for signs of strength along with US 10-year Treasury yields. The outbreak and expected economic fallout has pushed bond yields back to extremes last seen during prior two growth scares. In our view, 10-year yields above ~1.72% would be required to confirm new highs in the S&P 500.