Bond Bust

Issue 80;

• Bond yields resemble the 1970s.
• Software rebound.
• Europe in front.

The World Index retains a ByteTrend Score of 5 in USD. The dollar is down 2% since the late July peak, which has been supportive. Rising bond yields have become an issue.

World Index – Developed Markets – Daily

The Long Bond

The long bond (price) has resumed its downtrend after a period of consolidation.

Global 10-Year Yields

Yields are rising in most developed markets. Switzerland remains ultra-low, but rising slightly. China is the standout, with yields still declining. China has the highest public debt-to-GDP ratio in the world.

Bonds vs Equities

Fifty years of equities against bonds show how the current era resembles the 1970s. The 1982 and 2000 highs were breached in 2022 during the rate hikes. Equities keep on going while bonds drift.

The Wicksell Spread

According to Knut Wicksell, the late Swedish economist, the 10-year yield should approximately match nominal GDP growth. This is now 6.5%, with the yield 1.7% lower. Policies designed to keep a lid on yields when growth is high are inherently inflationary.

Largest Stocks – Market Caps > $2 Trillion

It is notable from earlier this year that the largest stocks are no longer driving returns. These five stocks – Nvidia, Apple, Alphabet, Microsoft, and Amazon - are worth $20.8 trillion, or 16% of global market cap. Apple is holding up but has delivered minimal alpha since late 2020. They also have a new CEO, which the market will surely test.

Market Leadership

The winners, i.e., the stocks with a weekly CAPR score of 5, make up 13% of the market. Most of the strength is in Europe and Asia, with a declining share in the USA. Financial services and tech still dominate, but much of that tech is in Asia. Basic materials and energy are improving.

Region and Sector Analysis

Financial services and tech make progress alongside healthcare and basic materials. Real estate and utilities face a headwind from rising bond yields.

Trend Classification – Local Currency

Most trend categories are flat, but emerging trends continue to build, showing the structural market rotation that is underway.

Trend Type Performance World – Local Currency

The leading trend performance has stalled globally. The best stocks have been oversold in a value rally.

Trend Type Performance Europe – Local Currency

Europe is the greatest beneficiary of the rotation. All categories are rising, but the weakening trends have done best. This demonstrates the scale of the recovery of oversold stocks.

Trend Type Performance USA – Local Currency

In the USA, the leaders have been doing poorly. Emerging trends are now outperforming, but once again, the oversold stocks have done the best. Software is the biggest beneficiary of the rotation.

Regions and Industries Average Relative Score

This table (below) shows the average CAPR score for each global industry by region and in total.

Banking and Tech Hardware were unchanged this week, but remain at the top of the table. Within the Americas, Tech Hardware was weaker this week, but strength in Asia kept it flat at a global level. Metals & Mining jumped, especially in America, as the precious metals rally showed staying power, and software stocks continued to rally. Investment stocks also continued to improve.

Luxury stocks (Home & Lifestyle) are weak overall, but have strengthened notably within Asia over the last month. Asian media stocks have also had a good month, from a low base. Utilities remain very weak around the world, but have stabilised over the last fortnight.

User Guide

Refer to our GTI: User Guide for an overview of the key concepts and terminology used in this report. These concepts may take a little bit of getting used to, but they are very powerful once you do.

Leading Trends with New Highs

These stocks are trading at the 30-week CAPR highs with a ByteTrend Score of 5. All charts shown are CAPR rebased to 100.

BHP Group

Commodities have dominated emerging trends for some weeks, across energy, precious and industrial metals, and grains/softs. BHP just delivered strong 2026 results with record earnings, a higher dividend, and a clear strategic pivot toward copper, making it look more like a future-focused miner than in the past.

CrowdStrike

CrowdStrike is a software company focused on cybersecurity. Despite broader software concerns, cybersecurity has grown in importance as AI has developed. AI companies are all too keen to hype up the power of their models to break into places they shouldn’t. Revenue growth, which had been slowing for years, has re-accelerated, and the shares have responded.

New Leading Trends

These stocks are trading at the 30-week CAPR highs with a ByteTrend Score of 5, except they are new trends this week, having previously had a score below 5. All charts shown are CAPR rebased to 100.

Palantir

The empire strikes back. Palantir, mired in controversy and political opposition, nonetheless offers a compelling product that companies clearly want. Their customer proposition is to turn fragmented, messy data into a “single source of truth” that non‑technical users can query and act on in real time. That has now been extended to AI agents, who can use the data to execute workflows.

Emerging Trends

These stocks are trading at the 30-week CAPR highs with a ByteTrend Score of less than 5. They don’t have to be in an uptrend, just emerging. All charts shown are CAPR rebased to 100.

Salesforce

Salesforce was badly impacted by the “SaaSpocalypse”, as Anthropic and others released AI tools that investors feared would disrupt its dominant CRM business. However, at its most recent quarterly results, it jumped over 20% in a day, as its CEO was joined by Dario Amodei, CEO of Anthropic, to launch “Claudeforce”, a collaboration between the two. Amodei spoke in glowing terms of Salesforce, and boosted by strong growth in its agentic AI business “Agentforce”, Salesforce flipped from AI victim to AI winner.

Weakening

These stocks are trading at the 30-week CAPR lows with a ByteTrend Score above 0. They are weakening trends but not yet downtrends. All charts shown are CAPR rebased to 100.

Walmart

Walmart reached record valuations recently, but then posted its worst same-store sales growth in years, a bad combination. Costco stock, a similar customer proposition, is also under pressure from a high starting point. While manufacturers of consumer products have struggled, these companies have rumbled ever higher for their high returns on capital and defensive credentials. But the most defensive thing is a low valuation.

British American Tobacco

The old line is that cigarette stocks are the best business in the world because, as Buffett said, they “cost a penny to make. Sell it for a dollar. It's addictive. And there's a fantastic brand loyalty.” However, smoke-free products now make up 20% of sales, and while the old business generates cash, these pouches, vapes, and other products drive growth. They remain under constant pressure from falling cigarette sales, but generate healthy cash to invest in the new business.

Bear Trends

These stocks are trading at the 30-week CAPR lows with a ByteTrend Score of 0. They are in a downtrend. All charts shown are CAPR rebased to 100.

Boeing

Boeing’s woes are well-reported. Safety is number one, and internal cultural failures led workers to prioritise the wrong things. The new Netflix documentary is not one for the nervous flyers. It operates in an effective duopoly with Airbus, but may have squandered that advantage. Growth has re-accelerated, and free cash flow beat expectations in July’s results. However, aircraft are slow to develop, test, build, and learn from, so this turnaround will take time.

Nike

Nike’s great error came during COVID, when it pulled out of retail stores to focus on its online channel. Upstart rivals cheerfully filled the vacant shelf space, and they are stronger competitors than Nike has faced in decades. One CEO later, they are trying to turn things around the right way, focusing on the customer, and are making some progress. However, once you lose momentum, it is hard to recover. Key partner Dick’s Sporting Goods reported poor results and crashed last week, underscoring the scale of the challenge.

GTI 200 Spreadsheet

We are pleased to share the GTI 200 spreadsheet. Download the spreadsheet below to view the CAPR and local currency scores, and more, for the world’s largest 200 stocks. Have a look at the different groups and the main list “All stocks”. The Insights tab is interesting, and don’t forget to expand the columns by clicking on the “+” at the top of the page if you want to see more trend data.

Outlook

Bond yields keep rising, and there is room for more. Rate-sensitive sectors don’t like it despite high demand for energy in the case of utilities, and good value in real estate. More importantly, the US market leadership is waning, leaving Europe and Asia to drive the market. The rotation is alive and well.

Thanks for reading GTI.