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Over the past couple of months, I've been sharing with you some tips about how new investors can break into the market. And I think it's the perfect time for our next lesson – looking this time at the inextricable connection between stocks and bonds.
Although I tend to write about the stock market as if it were a singular entity, I'm usually talking about the markets in the plural. Not just the Dow Jones Industrial Average, or the S&P 500 Index, or the Nasdaq – when I'm talking about the stock market or stocks, I am talking about ALL the indexes.
But when I use the word markets, I'm talking about not just the stock market indexes but also the entire bond market.
The bond market isn't just the U.S. Treasury bond market. The bond market is to me, and should be for you, all the different bond markets, including but not limited to Treasurys, corporates, sovereign bonds, and junk bonds.
The word markets encompasses stocks and bonds because they are inseparable. There is an immutable relationship between stocks and bonds. They are connected at the hip. From now on, you, too, should always think of markets as both the stock market and the bond market.
It's OK to only think about stocks when you're making stock trades, analyzing your stock positions, or just chatting about the stock market. But always keep the bond market in the back of your mind when you're thinking about stocks. Remember the bond market when you're listening to pundits talking about stocks and when you're reading about stocks or the stock market.
And now I'll tell you why you almost always have to think of stocks and bonds together.
Stocks and Bonds: Mirror Images
And now, here's the reason stocks and bonds are so connected:
About the Author
Shah Gilani is the Event Trading Specialist for Money Map Press. In Zenith Trading Circle Shah reveals the worst companies in the markets - right from his coveted Bankruptcy Almanac - and how readers can trade them over and over again for huge gains. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.