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Bonds Are Rallying on Economic Fears. They Have More Gains Ahead.

1. 10-year Treasury yields fell to 3.959%, dropping below 4% for the first time since April. 2. Decline attributed to weakening economic data, government shutdown, and Fed rate cut expectations. 3. iShares 20+ Year Treasury Bond ETF returned 8.2%, outperforming S&P 500's 7.3%. 4. Strong bond performance could continue if economic data remain poor through 2025. 5. Investors prefer bonds as safe assets in a weakening economy, impacting stock investments.

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FAQ

Why Neutral?

While bond yields falling can stabilize markets, it also signals economic weakness. Historical trends show low rates precede weak stock performance, yet the stock market remains near highs.

How important is it?

The article highlights critical economic indicators that influence market conditions, thereby affecting SPY. While sentiment is currently mixed, ongoing trends suggest cautious investor behavior.

Why Short Term?

The immediate impact from falling yields will influence investor sentiment. Economic uncertainty might lead to fluctuations in SPY but could stabilize as economic indicators mature.

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