The new TINA trade: There is (Still) Not (Much of an) Alternative

A lot happened in a day where the S&P 500 didn't swing much. Once again, I think the easiest place to start is with the U.S. dollar.

It's been the asset most central to our coverage on TDANetwork the past two months, ever since we started outlining why the bear case for the dollar was losing credibility back in March. It was about how softening European economic data and political uncertainty in Brexit and Italy could turn currency strength away from the euro and pound into dollar. We followed this up in late April right before the dollar rocketed when the logic for a stronger greenback really broke down.

The logic behind it helps put some of the big cross-asset moves into perspective. "Synchronized global growth" wasn't really the case through much of the first quarter, and the Fed was and remains the only central bank with strong convictions for rate hikes, due to the resilience of our own economy and the shot of life it's getting post-tax reform etc.

My conclusion from our coverage on May 8 was that all this meant the trajectory for the 10-year Treasury through 3% was likely to be a very slow one. Indeed it has been, with the benchmark now at 2.8%. None of this is means the original narrative coming into 2018 of higher rates and inflationary pressures is gone, it's just going to be a slow transition into that new "normal."

So why didn't stocks get rocked yesterday? Apart from the stuff you'll hear about U.S. insulation from Euro-crisis, equity resilience is also tied into that central bank and economic divergence that's behind the strong dollar. As long as those trends -- relative strength of the U.S. data, dovish central bankers outside the Fed, Euro political uncertainty -- remain in place, it's hard to see how the 10-year rockets higher.

And as long as it doesn't, the alternative to equities that exist in bonds and elsewhere remain muted, and stocks continue to be the best option for investors seeking yield. Equity strength probably won't look like 2017, but the core characteristics of the strength in growth stocks don't seem to have changed much.