Tapering and tightening are not the same thing. Tightening is tantamount to stepping on the brakes, while tapering is akin to easing up on the gas pedal. Whether this analogy holds true depends on which “effect” the market is more sensitive to.
In an environment of unprecedented accommodation, even a hint that the money printing will be curtailed can act like a tsunami on financial markets. Despite the headwinds, there are markets where traders can find refuge, an oasis where commodity-specific fundamentals prevail.
The sharp rally in 10-year U.S. Treasury yields seen since the start of May has pushed bond yields above the average dividend yield for U.S. equities, removing one of the strongest tailwinds supporting the rally that took the S&P 500 to new all-time highs.