Stocks Nearing Critical Juncture

The dominant bond market theme while the US Federal Reserve has been engaged in QE is the fall in TIPS yields.  10 Year TIPS yields fell from 3% in the fall of 2008 to a low of -.84% on December 1, 2012. Falling real rates have been very supportive for stocks, with the correlation between the S&P 500 and 10 Year TIPS yields at 93% over the last five years.  It appears that stocks are nearing a critical juncture with respect to the relationship with TIPS yields.  We are getting near the point where the lagged impact of rising real rates could begin to have a negative impact on stocks.