David Hay — Haymaker Daily: What's That Old Saying About Those Who Ignore History? — the 10-year has gone from 0.5% (2020) to 5% while the S&P 500 returned 16%/yr, a stock-over-bond gap with no precedent in Jim Paulsen's 76-month series since 1926 (~28%, above 1956 and 1999); the nearest analogue is 1986-87, when yields ran 7.2%→10% while stocks rose ~40% — then crashed 28% in two months. Cash "is definitely not trash" (Sep 15 2026)

"Hello, Haymakers – Take Warning." A short Daily built on one anomaly. Haymaker has been "consistently bearish on long-term U.S. Treasury bonds and notes since the summer of 2020," when the 10-year "briefly hit 0.5%… Today, it is at 5%, a tenfold increase." Yet "the S&P 500 has returned 16% per year since July 31st, 2020, far above the 9% to 10% annualized gain… over the very long run" (and only 6.75% measured from 1927, a figure that absorbs 1929–32). "Typically, severe bond bear markets act as a powerful headwind on stock prices. Accordingly, the results of the last six years are highly unusual." The one precedent: "from the summer of 1986 until late October of 1987, long-term U.S. Treasury yields erupted from 7.2% to 10%. Yet… the S&P 500 vaulted by nearly 40%. Of course, what happened next is the stuff of Wall Street legends… or nightmares" — a Bloomberg total-return panel shows the index −28.4% from Sep 30 to Nov 30, 1987. On Jim Paulsen's chart (via Jesse Felder) of stocks' trailing 76-month annualized return above bonds since 1926, 1987 barely registered, the late-1990s spike was bigger ("this episode also led to the punishing bear market of 2000 to 2003"), and today's reading (~28%, marked "???") tops every prior peak including 1956: "there's never been such a pronounced performance gap between stocks and bonds." The consensus credits growth and AI — "that could be true, but with both interest rates and oil prices soaring, we continue to believe cash is definitely not trash."

One-line take: a macro-only Daily — no security is named — that turns the previous day's raise-cash call (Sep-14) into a historical warning. The argument is a broken-relationship test: rising long yields normally drag on equities, so six years of a tenfold 10-year yield rise (0.5% → 5%) alongside 16%/yr S&P returns is an outlier, and outliers in the stock-versus-bond relationship have ended badly. Two exhibits carry it. 1986–87 is the closest match in kind — long yields 7.2% → 10% while stocks rose ~40% — and it ended in the October 1987 crash (−28% in two months on the Bloomberg panel). The Paulsen/Felder 76-month relative-return series is the match in degree: the late-1990s gap (~16%) preceded the 2000–03 bear market, and today's ~28% is the highest in a series back to 1926. Hay concedes the bull explanation ("strong economic growth and the seemingly limitless potential of AI… That could be true") rather than dismissing it, but sets it against two live pressures — rates and oil both soaring — and restates the positioning: "cash is definitely not trash." The footnote on long-run returns (9–10% vs 6.75% from 1927) is a quiet reminder that starting points and crashes dominate compounded outcomes. Nothing rowed: the S&P 500, the 10-year Treasury and long bonds are discussed as macro objects; no fund or ticker is named and none is inferred.

1. Key points

The record — six years of being bearish on bonds

"This newsletter, as well as its predecessor, has been consistently bearish on long-term U.S. Treasury bonds and notes since the summer of 2020."
Then the 10-year "briefly hit 0.5%, i.e., one-half of one percent. Today, it is at 5%, a tenfold increase."

The anomaly — stocks ignored it

"Despite this radical rate rise, the S&P 500 has returned 16% per year since July 31st, 2020, far above the 9% to 10% annualized gain, including dividends, it has generated over the very long run."
Footnote: from 1927, "the actual total return has been much lower at 6.75%," reflecting "the great stock market crash of 1929 and the subsequent devastating bear market that lasted until 1932."
"Typically, severe bond bear markets act as a powerful headwind on stock prices. Accordingly, the results of the last six years are highly unusual."

The precedent — 1986–87

"From the summer of 1986 until late October of 1987, long-term U.S. Treasury yields erupted from 7.2% to 10%. Yet, from August of 1986 through September of 1987, the S&P 500 vaulted by nearly 40%."
"What happened next is the stuff of Wall Street legends… or nightmares" — the Bloomberg panel: SPX −28.44% price (−27.98% with dividends) from 09/30/1987 to 11/30/1987, bottoming near 225 after the October 19 crash.

The scale — the widest stock/bond gap since 1926

Paulsen's "Average Annualized Relative Total Return of U.S. Stocks above U.S. Bonds, Trailing 76-Month Periods Since 1926" (Ibbotson & Bloomberg data; shared via Jesse Felder).
"Ironically, the significant performance divergence back then [1987] didn't create one of the biggest spikes… those, such as in the late 1990s, were far more dramatic," and that one "also led to the punishing bear market of 2000 to 2003."
Labelled prior peaks 1939, 1956 (~25%), 1969, 1981, 1999; the current reading (~28%, "???") is the highest: "there's never been such a pronounced performance gap between stocks and bonds."

The conclusion — cash is not trash

The bull case is named and not dismissed: "the always cheery consensus is hopeful that this is due to strong economic growth and the seemingly limitless potential of AI. That could be true."
"But with both interest rates and oil prices soaring, we continue to believe cash is definitely not trash" — consistent with the Sep-14 call to raise cash from the weaker-rated names.

Housekeeping

Two charts (Bloomberg SPX total-return analysis for Sep–Nov 1987; Paulsen Perspectives "Chart 5") described in brackets in the saved text.
No security is named; no ticker is inferred. Signed "The Haymaker Team."

2. In plain English

Bond yields and stock prices usually fight each other. When interest rates on safe government bonds rise, investors can earn more without taking stock-market risk, and the future profits companies earn are worth less in today's money — so rising long-term rates normally hold stocks back. Hay has expected rates to rise since 2020, when the 10-year Treasury yield was an almost unbelievable 0.5%. He was right: it is now 5%. What he finds strange is that stocks didn't care. The S&P 500 has returned about 16% a year since mid-2020, well above its long-run average of 9–10%.

He asks when that has happened before. The closest example is 1986–87: long-term rates jumped from 7.2% to 10%, and stocks rose almost 40% anyway. Then came October 1987, when the market crashed — the index fell about 28% in two months. A second chart, from strategist Jim Paulsen, measures how much stocks have beaten bonds over rolling six-year-plus periods going back to 1926. The late-1990s peak in that gap was followed by the 2000–2003 bear market. Today's gap is the largest in the whole record.

He doesn't claim a crash is certain — he grants that strong growth and AI could explain it. But with both interest rates and oil prices climbing fast, he thinks the odds favour caution, so holding cash is sensible. His aside about long-run returns makes the same point from another angle: measured from 1927, stocks returned only 6.75% a year, because one crash early in the record dragged down everything after it.

Macro viewpoint — no security named (the S&P 500, the 10-year Treasury and long-term bonds are discussed as macro objects; no ticker is inferred). Summary derived from the paid Haymaker Daily (text in transcript.txt) for personal study. Not investment advice. © Haymaker / David Hay for source material.