The 10-year Treasury yield is currently around 5%... That's one of the highest levels since the 2007 housing collapse.
And there's speculation the Federal Reserve could raise interest rates again soon. That has many investors worried... for good reason.
You see, when interest rates move far and fast, it can break things.
The financial world is built on spreads and leverage. If you can borrow at one rate and invest at a higher one, it's rational to plow as much money as you can into that trade.
When those spreads change, billions or trillions of dollars' worth of bets need to get unwound. And that can lead to a spiral of selling.
This is the biggest fear investors should have today.
As my colleague Gabe Marshank, editor of Market Maven, recently explained at our annual conference's Alliance Day...
Big market declines are usually preceded by big increases in interest rates. That's when things break in the system. It's dynamite fishing. You don't know where the leverage is in the system until after it breaks.
That's what happened with the Japanese "carry trade" in mid-2024.
Investors borrowed in yen at very cheap rates, converted the yen to other currencies (like the U.S. dollar), then parked that money in higher-yielding assets (like U.S. Treasury bonds).
Now, this carry trade is a bet on currencies as much as it's a bet on interest rates...
And in July 2024, the Bank of Japan announced a surprising interest-rate hike, boosting its short-term target rate from around 0% to 0.25%. That's not a big move at all. But it strengthened the yen, putting the carry trade at risk.
The market couldn't digest it. And it led to a quick crash.
Banks and hedge funds had to sell global assets and buy back yen. You can see in the chart below that the yen's spike led U.S. stocks and Japanese stocks to plummet 6% and 19%, respectively, in just a few days. Also, volatility in the U.S. market soared from about 15 to 40, as measured by the CBOE Volatility Index ("VIX")...
All that to say, slow moves in interest rates can be absorbed by the market. Fast ones can break things.
And the current move in interest rates has been extraordinarily fast. Just look at the Merrill Lynch Option Volatility Estimate ("MOVE") Index, which measures bond-market volatility. Volatility reached 110 not too long ago – matching highs from earlier this year...
Fortunately, interest rates are hovering at their current levels today. That gives us some breathing room.
But we're watching the MOVE Index... the continued change in the 10-year and 30-year rates... and the Treasury auction of the 10-year notes on November 10. (To raise money from bonds, the Treasury regularly conducts auctions in the open market. It's a vital time to see the balance between buyers and sellers.)
Together, these three things should help us assess whether the bond market is finding its footing... or more turbulence is on the way.
So far, the market hasn't broken. And it may not. But these are the kinds of things that do break markets.
That's not reason to panic. But it is reason to have your antennae up.
The credit market gives important signals, though it isn't a crystal ball. It can flash warnings for months – even years – without a crash ever materializing. The challenge is knowing when a warning is just noise... and when it's signaling something more serious.
Put simply, if you've been watching the markets over the past couple months, you're right to worry. The warning signs deserve some attention – but not full-on panic just yet.
It's something my team and I are keeping a close eye on.
We've also been interested in the midterm elections... As we told you a few weeks ago, stocks tend to do well after the midterms finish up.
And just another note – stocks have historically performed well under divided governments, although returns have been relatively weaker with a Republican president and a Democratic-controlled Congress. Take a look...
Now that the midterms are over, my colleague Greg Diamond believes a rare trading window is opening that could double investors' money in the weeks ahead...
Greg is an expert trader who once made $4.6 million in a single day on Wall Street. His strategy – which thrives in both bull and bear markets – focuses on finding specific periods when stocks and funds are likely to experience the biggest price movements.
According to Greg, one of those periods is beginning right now... He's calling for a short-term post-election rally in stocks. And with his help, you could cash in on some big market moves.
Greg's track record includes 28 trades that generated gains of 100% or more within 18 days. He's looking to add to that list before the year is over.
Click here to learn more about Ten Stock Trader and how this "doubling window" could give you a chance at triple-digit gains.
What We're Reading...
- From October... "The Midterms Are Coming."
- Something different: Clothing manufacturer Fanatics takes a bigger NHL design role with all-32 team Hometown Remix jerseys.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
November 4, 2026