“The bond market is smarter than the stock market” is a popular financial saying. The bond market has more institutional investors and the stock market has more individual (and unsophisticated) investors, according to this saying. “I’m not saying it’s always true, but there’s a reason that the bond market tends to lead the stock market,” one market strategist said in 2005. However, with high frequency trading, it’s questionable how much “smarter” the bond market is and if the bond market “leads” the stock market at all.
 
“The bond market is ‘smarter’ than the stock market” has been cited in print since at least 2002.
   
 
Option Investor
Intraday Market Update, Friday, 03/01/2002 01:00:00 PM EST
Ten-Year Turning
by Eric Utley
(...)
We (Jeff Bailey and I) monitor the bond market closely for its impact on stock prices. There are two reasons for our concern with bonds: 1) The bond market is “smarter” than the stock market. 2) The bond market is bigger than the stock market.
 
Minyanville
Minyan Mailbag - Stocks & Bonds
By John Succo Feb 10, 2005 10:06 am
John,
I agree with you 100% that the bond market is smarter than the stock market, but tell me what you think of this theory.
 
Google News Archive
22 October 2005, Rome (GA) News-Tribune, “Bonds a gauge of success” by Michael J. Martinez (Associated Press Business Writer), pg. 6A, cols. 3-4:
“The presumption is the bond market is smarter than the stock market,” said Ken Tower, chief market strategist for Schwab’s CyberTrader. “I’m not saying it’s always true, but there’s a reason that the bond market tends to lead the stock market.”
   
Gold Trail Mines
August 21, 2010
Bond-Market Says “Recession”
Wall Street legend David Rosenberg says the bond-market is flashing “recession”
By Tom Dyson
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Some markets are smarter than others. Lumber is a great leading indicator of the housing market. The Baltic Dry Index often leads the shipping stocks. Rosenberg says the bond market is smarter than the stock market.
   
Twitter
Patty Edwards‏
@PattyEdwards  
Bond market is smarter than the equity market. Discount at own risk RT @WBPetersen: @PattyEdwards italy is noT going to default,CDS is noise
1:00 PM - 14 Sep 11
 
Risk and Return
November 12, 2011
Bond Market Needs to Eat Some Humble Pie
By James Dailey
(James Dailey serves as the lead portfolio manager for TEAM Asset Strategy Fund and as TEAM Financial Manager’s chief investment officer. This originally appeared at their blog, TEAMThink.)
I regularly hear/see market players comment that the bond market is smarter than the stock market. I think this comes from a largely valid view that many bond market-centric investors are smarter when it comes to subjects like math and statistics. I certainly retain an inferiority complex in this regard, but anytime I get too down on myself I remind myself that the bond market is driven largely by two major concepts that don’t hold up to the one thing I have a high degree of self confidence about – common sense.
     
International Business Times
The Overnight Report: Manufacturing A Further Rally
April 3, 2012 8:39 AM EST
By Greg Peel
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It is a truth commonly held on Wall Street that the bond market is “smarter” than the stock market. The bond market tends to be more ahead of the curve, and it’s not that difficult to appreciate given trading in Treasuries is more of a game for professionals while inexperienced retail investors get swept up in shares.
 
InTheMoneyStocks
If Bernanke Does Not Taper Soon, The Bond Market Will Force Him
Presented by Nick Santiago   August 01, 2013 11:00AM
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There is an old saying on Wall Street that the bond market is smarter than the stock market. You see, the people that run the bond market have much more capital than the people that buy stocks. Remember the old saying, follow the money.