Interest rates and inflation are in the news almost every single day. That got me thinking, in the longer-term context where are we?

Above is the weekly chart of $TNX for the past 20 years. The 10-year Treasury Yield. You can see the recent run-up. You can also see we are nearing the longer-term downward trend line. We should find strong resistance here. You can also see longer-term resistance at about the 3.2% level.

Related, you can see the Producer Price Index below… a leading indicator of inflation continues to spike and has broken out of an 11-year consolidation box. And we know the longer a trend goes sideways the longer the breakout will go. Higher inflation will mean higher interest rates.

Our sense is that is where we are headed above 3% this year and that it will be a headwind for growth stocks and for bonds.

This is not a prediction. I do not forecast. But, we use a lot of history and ratios in our probabilities, and this is certainly one possible path we could follow.

Of course, all of these changes if they occur, will show up in our math. We will manage it like we always do by staying focused on the numbers in front of us.

Hope this helps your thinking.

Our V2 Model tracks over 120 asset class ratios to assist us in deciding how and when to allocate our holdings. No single indicator, chart, or list gives market clarity. They each give a point of view that we factor into our model. We do not forecast. We follow the math. It has led us to remarkable long-term performance.

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Chris

Produce Price Index - Weekly - 40 years.

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We do not anticipate what is going to happen. We allocate based on where things are. We do not forecast, we follow the math and work to get on the right side of the next extended trend.

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Chris Vig is president of The Vig Company and is an investor, artist, author, business consultant and former CEO living in Monona, WI. This article is for entertainment purposes only. We may own, buy, or sell any security listed here at any time. Do your own diligence when investing your hard-earned cash. Follow The Vig Company on Facebook.

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Interest Rates Close To Breaking The Longer Term Trend!