I am not sure who coined the phrase Bond Vigilante, maybe it was Ed Yardeni, but the thought evokes the sound of a hundreds of horses galloping, the thunder of their hooves as they approach. At first, it’s just a faint sound something to make your head lift up.

Scouts, watchman along the walls are usually the first to hear and are aroused. In the financial markets, traders are the watchman and scouts constantly searching the horizon for opportunities, and threats.

The Seasoned Watchman are few, their numbers decimated and automated. Yet, enough of their wisdom and historical lessons are remembered. They sense what is coming, the vigilantes are coming for the prized bond bull. The bull is greatly aged, its genes have spawned many mini bulls in equities, real estate and emerging markets.

The central planners (Fed, ECB, BOJ, China etc.) have decided that the time has come to inflate, let the new bull (commodity, tech, emerging markets, Asia) take over the herd. This new bull is untested and hard to predict , like a bull in the China shop (Shanghai, Hong Kong, Shenzhen) it can do some serious damage given its new found expanded zone, bigger range for inflation, acceptable higher price to earnings, higher housing and regulatory costs and its temper. Doesn’t play well with perceived threats (geopolitical).

Traders-scouts will always be the first to embrace this new bull, giving the vigilantes what they want, and moving on to the new town. The citizens, investors and old line businesses will have to either embrace the new environment or be left in the dust.

Many will remain in futureshock, left wandering the desert, don’t be left behind, the bell has rung. The thunder of the hooves is growing and expanding.

John is a Senior Broker at Sierra Mesa Trading and has been working with clients in the field of financial products for over 25 years. John can be reached at LinkedIn