The bond market… who cares?
Every morning on my drive to work I put on the 9 o'clock hour of Squawk on the Street. It's my fastest way to get a read on what's happening in the world and, let's be honest, what it means for my retirement account. I've been doing it since the episodes showed up on Spotify.
For a long time there was one segment I'd roll my eyes at. Rick Santelli comes on, fired up about a few basis points of movement in bond yields. A basis point is a hundredth of a percent, a yield going from 4.00% to 4.01% is one basis point, so hearing him get worked up over hundredths of a percent felt like a lot of noise. I've got a long time horizon and I'm reasonably "in tune" with the stock market. Bonds were background.
That showed up in my own portfolio, too. When my wife and I started working with financial advisors, the ones who take their 1%, the recommendation was the classic 60/40, stocks to bonds. I pushed back hard, and we eventually landed at 90/10. (Yes, still 10% in bonds. Leverage opens up a different story, but that's for another day.)
Here's what I've had to admit lately. I learned bonds in advanced finance courses in undergrad and grad school, and it's almost impossible to teach this stuff to a room of students who haven't lived through a stretch like the last few years, unless they grew up around a family office. You have to feel it. And with everything happening with interest rates, it's finally sinking in: bonds might be the single most important thing in the world. Mortgages and loans, the national debt, equity valuations, the hurdle rate every company uses to decide what to build, all of it bends around bond yields. Look at where the money goes: governments, wealth management, and now private companies financing AI infrastructure with bond issuance (looking at you, hyperscalers). The global economy quietly revolves around this market, and right now you can watch it happen in real time.
So I owe Rick Santelli his flowers. I wasn't familiar with his game. I'm paying attention now, and still learning.
I'm also keeping my 90/10. (This is not financial advice. Trust me.)
