I never envisaged that I’d link the bond market to Barbie and Qantas but it’s never been so timely to do so. And it comes when I and the world have had a newfound respect for the once thought washed up Barbie.

Having a granddaughter, who’s pretty strong willed and who recently discovered Barbie, means I’ve got to know the ‘new age’ version of Mattel’s hugely successful product. Here at Switzer Daily we’ve noted the business success of Barbie for Mattel over the years and in 2019 Maureen Jordan wrote a piece entitled: “Barbie, with breasts, led to controversy!”

Apparently when Ruth Handler, co-founder of Mattel, introduced Barbie to the Yanks in 1959 there was a huge outcry because little girls’ dolls were always baby dolls sans breasts!

Ruth was a powerhouse businesswoman and an inspiration to anyone wanting to grow a business but Barbie did become a victim of new generations, who thought the whole Barbie deal was sexist, ‘bodyist’ and a bad influence on young girls.

So Barbie had a makeover in 2016 and got wider hips and shorter legs and the changes have continued, with the company introducing three new body types -- curvy, petite and tall. And there is a new Fashionistas line also, which has seven skin tones, 22 eye colours and 24 hairstyles!

All this and the lockdown from the Coronavirus pandemic and bored children who have reached out for Barbie over 2020 has meant Citi has put a “buy” rating on the company, despite Mattel’s share price having risen over 65% in a year!

Some stocks that did well during the lockdown period are now being dropped, as a rotation out of stay-at-home stocks gives way to reopening trade stocks.

This chart of Kogan.com shows how a stock that did well during the lockdown is now losing friends.

Kogan.com (KGN) six months

While stocks like Qantas, which Alan Joyce says will be operating at 80% of its domestic business by July 31 and will be flying overseas by October, have been on a nice rise.

The chart below shows how the Qantas share price has gone from $3.70 in August, when Kogan was flying high at $21.19. But Qantas is now a $5.10 stock, which means there’s been a gain of 38% in six months. Over the same time, Kogan’s share price has fallen from $20.89 to $15.60, which is a 25% slump.

Qantas (QAN) six months

Blame all this on the rotation trade.

And that’s what I expect will drive stocks for some months. Tech stocks will suffer as fund managers will chase the companies that will benefit  from vaccinations, falling infection and death rates, as well as the huge stimulus spending coming down the pike. However, this is causing a temporary problem and the bond market is the pest that’s bound to worry some investors in coming weeks.

I hate the bond market. It’s stupid and it’s over-valued, meaning it gets too much attention. This can have terrible effects on the more likeable but even crazier stock market!

The stock market is more like a yapping dog who can chew your shoes when you stay away from home too long. But the bond market is more like a cat, whose complicated ways I find confronting.

So while the stock market is crazier and more volatile, the bond market can shock you when you least want it to do so.

There’s lots of reasons to hate the bond market. The interest rates they pay are often really low. Right now, the 10-year rate on a US Government or Treasury bond is 1.6% but a 0.2% rise is equal to a loss for anyone who previously bought one of these low-priced bonds. It’s a loss to you if you locked your money in at 1.4% and it’s now 1.6%.

But the bond world is even more complicated because when the yields or effective interest rates rise, the market commentary says money comes out of the stock market into the bond market. And last night the Nasdaq Index (the home of the sexy tech stocks) lost 3.3% at one stage, with Tesla down 6% along with the FAANG stocks — Facebook, Amazon, Apple, Netflix and Google (Alphabet).

These stocks are huge in the S&P 500 Index as well, and this drove this Index down too. And it was pointed out that the 1.6% on the 10-year Treasury was better than the income you’d get if you were invested in an exchange traded fund (or ETF) based on the S&P 500.

This explains why this bond market move hurt stocks overnight.

I think any stock market overreaction to the bond market pushing up 10-year bond yields will be short-lived. Why? Well, these rising yields say the US economy will grow really fast and that has to be good for US company profits and share prices.

I interviewed AMP Capital economist Diana Mousina on my Switzer TV Property show last night and she said her economics team thinks the US will grow by 6% this year and made the point that others are saying 7%!

That’s why the bond market is expecting inflation and, eventually, shorter term interest rates will rise. But Wall Street is worrying far earlier than it has to. But that’s what these mad suckers do and I can see a buying opportunity if this pullback goes on longer than it needs to.

Watch this space. I intend to make some money out of the silly reactions from that despised bond market, but we have to be patient.