Chart of the Day - Monday, January 11th, 2021

Today’s Chart of the Day was shared on Twitter by Ian McMillan (@the_chart_life). It's a ratio chart of Stocks vs. Bonds over the past couple of decades (S&P 500 vs. US 30-yr Treasury Bond futures). As a reminder, when this ratio is rising, it means Stocks are outperforming Bonds, and vice versa. Ratio charts are useful because they address the issue of opportunity cost. Which asset will provide the best ROI? As Ian points out, it looks like the alpha remains in the Stock Market, while the opportunity cost continues to be in the Bond Market. In a comment to The Chart Report, Ian said, "I get why someone might be inclined to rotate out of Stocks after the outperformance we've seen in recent months. But right now, that trend is not showing any signs of exhaustion. I think it makes sense to continue being overweight Stocks and underweight US Treasuries, as long as this ratio remains above the former highs.