Bond Yields Rise, Stocks Start To Buckle, As Second War Inflation Wave Appears On Horizon

Last week the price of wheat rose 7% in a single day. The price of oil, of course, rose at the start of the Trump/Israel war against Iran and got everyone’s attention. Everyone sees the rising gas price when they go to fill up their car, but the secondary inflationary impacts of the conflict are now beginning to appear on the horizon. Rising fertilizer costs, have helped to spur an increase in agriculture prices, which accelerated last week. Consumers will start to feel the impacts of that in a few weeks in grocery stores and restaurant owners will feel the pinch too.

Treasury bonds yields are going up as a result of this too, and, of course, the growing US budget bust, which is now projected to grow to $1.8 trillion this year.

Yields are now at new one year highs.

Yes, we have seen a tremendous rally in the S&P 500 and Nasdaq in the past few weeks, but that rally is now extremely overbought, and with the rise in yields, is likely to stall out for the time being.

In fact, as this chart shows, the rally has not been confirmed by market internals, as the percentage of stocks above their 200-day moving average inside the S&P 500 has actually FALLEN during the past few weeks as the market rallied to new highs.

Also, last week, we got a nice pop in the price of silver early in the week, but that move was not confirmed by the GDX/GLD ratio, which, as I wrote last weekend, is the key indicator I look for as a buy signal for the metals and mining stocks.

Without that signal, it seems to me that we are going to see the metals and mining stocks continue to trade in a range for at least the next several weeks.

In fact, with the way all the markets look right now, I wouldn’t be surprised if we don’t see a dip, pause, or pullback in just about everything, after the big recent run in Nasdaq stocks and subsequent rise in bond yields last week, with no end to the Iran conflict in sight.

The conflict is still on - blockades are acts of war and the next inflation wave impact from the closure of the straight is now on the horizon.

Trump went to China and Xi said nothing to suggest he would help Trump get Iran to end its closure of the straight. Maybe he can’t. Wars change nations, now Iran is a total national security state with IRC generals in control of it. This means that if Trump and Israel start to bomb again, they will actually become more likely to build a nuclear weapon, seeing the example of North Korea being left alone, but less likely to ever use one if it builds one, because the one thing Hegseth is correct about is that there has been a “regime change” in Iran. The IRC is now in total control. Whatever happens in the end, the situation is not ending this week.

-Mike