The 10 Year Note Just Hit This Level: What It Means for Economy

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Ty (1:01)

What is going to break in the economy, man? I can't believe you've been calling it the 10-year note, 30-year mortgages, the bond market, the Fed. What the heck is going on, Michael?

Michael Zuber (1:13)

Well, it's interesting, because last time we spoke, I'd read an article that made reference to the last 16 times the 10-year note rose 50 basis points above the 200-day moving average, all the way back to 1970 And I didn't really have any context about what those things were. Well, earlier this week, I think it was on Wednesday, I gave everybody the entire list. From October 1974 to 2023, there were 16 times that this happened. And every single time, so it is a perfect score, something broke. Sometimes it was big banks failing. Sometimes, like Orange County, remember when Orange County went bankrupt? That was one of them. 1987 flash crash, tech bubble, you know, GFC, S&P bear market, S&L crisis, all of these could be blamed back to a consistent theme of the 10-year note rising rapidly, rising in a significant manner, over 50 basis points above its 200-day moving average, which means it's moving quickly and significantly. And it just happened for the 17th time. So I think it's pretty certain something is going to break.

We may not see it coming, right? It could be another flash crash like 1987 It could be banks. It could be emerging markets. It could be the, you know, one of the times was Southeast Asia, another time was Mexico, currencies.

I think it's, I think it's fair to say, Ty, something big is going to break.

Ty (2:56)

I said this last week.

You got my attention. You got my attention, man. You got my attention. I am, I said this jokingly. I said, oh, now I'm scared, Michael. And yeah, but I'm used to being scared now.

SPEAKER_5 (3:12)

Oh, God, I'm so sorry.

Ty (3:13)

So I'm used to, no, it's good, though. I mean, hey, keep your head down, keep working, keep your head down, keep working. We'll talk more about how to adapt and what to do. Let's talk about the 10-year note. What a wild ride, the 10-year.

Michael Zuber (3:26)

Yeah, so again, we're recording this Wednesday. I have some travel this week, but this will drop Friday. So who knows where the 10-year note will be by Friday morning when this goes live. But as of Wednesday recording, it hit 5.3.

Ty (3:38)

Yeah.

Michael Zuber (3:39)

Not 5.03, it hit 5.3.

Yeah. Which means in like eight days, it's gone up 30 basis points. And I talked to Taylor from Life Goal Investments. He's like, Michael, that's like a 10-12% move in the stock market. This move is violent, it is sudden.

Ty (3:58)

And say that again about the stock market, because I want everybody to really hear this. Just like hit that.

Michael Zuber (4:05)

I asked Taylor to give me a comparison to the S&P 500 Right? Because when we hear the bond movement move 30 basis points, only the geekiest of all of us, maybe not even myself, understand really what that means. But if you translate that violent move to the stock market, Taylor's like, that's a 10-12% move.

Down. Right? Because of interest rates go up, bonds go down. Right? It's an inverse relationship. So he's like, this move is significant, it's sudden, it's almost unprecedented. Again, it happened 16 times before, which over the course of 75 years is not very often.

So he's also, and Taylor did some research and he found these 16 instances. If you want to see the full list, look at him on Instagram, it's Life Goal Investments. He has a full post on the 16 occurrences. So yeah, dude, something's gonna break.