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Bond traders and investors kept the bond rally going today December 20. The yield on the 10-year Treasury dropped another 8 basis points to 3.85% today. The yield on the 2-year note fell 4 basis points to 4.40%. The drop in yields came as a result of gains in bond prices.

On the other hand, the major stock indexes had a big down day. The Standard & Poor’s 500 fell 1.47% and the Dow Jones Industrial Average ended the day down 1.27%. The small-cap Russell 2000 dropped 1.86%. The NASDAQ Composite and the NASDAQ 100 soared 1.50% and 1.53%, respectively.

The differing results don’t reflect a divergence of views on interest rates–both bond and stock markets see the Federal Reserve cutting interest rates in 2024. The difference does, however, reflect differing views on valuation. The selling in stocks today came as Wall Street strategists asked if current record highs on the major indexes already priced in all the good news ahead for stocks for the next few months. Nothing on the geopolitical and earnings horizons argues that stocks will move higher on unexpected good news. So stocks saw some profit taking today as some portfolio managers moved to lock in some of the gains from the recent rally.

Cash flows at this time of year, I’d remind you, are positive as investors from individuals to institutions put money to work in an effort to meet year-end deadlines. January will be different cash-flow story. Looking that far ahead and at forecasts for anemic earnings growth when fourth quarter earning get reported in January has likely lead portfolio managers who caught the explosive rally from October lows in its early days to take some money off the table now.