Timing Solution Digest #22 SNP and T-Bonds yield correlation, what is next?

I would like to explain what this result means in practice. Formal cyclical analysis shows that we are moving to in red/positive zone – deflationary environment - period when stocks and T-Bonds yield move together or do not correlate. IMHO stocks will not drop just because of T-Bond yields getting higher; if they drop, it may occur for be some other reason. Though I accept an argument like this: “it is easy to discuss deflationary scenario when FED rate is 0-2%; but what about it’s going to 5 %?”. Look at the chart below. The last deflationary period covers 1940-1964 interval. Within that period the rate varied in 2-4% range, in 1964 FED rate overpassed 4% zone and inflationary period begun. This is the chart: XXXX Inflationary period started in 1964 when T yield reached 4.2%. So, I agree, high yield may work as a trigger that switches the environment. And then we get a negative correlation. Sorry, I would prefer to see the picture more definitive. But – this is wha