Stock/Bond Ratio
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Definition
A relative-strength ratio (e.g., an equity index or ETF divided by a long-bond proxy) that tracks the market's appetite for risk assets versus safe havens. Rising = risk-on, falling = risk-off.
How to read it
Dividing a stock proxy by a bond proxy produces a single line whose direction summarizes cross-asset risk appetite. A rising ratio means equities are outperforming bonds — capital rotating toward risk — while a falling ratio means safe havens are winning, consistent with defensive or risk-off conditions. Because it nets two large asset classes against each other, the ratio filters out moves that are merely 'everything up' or 'everything down' and isolates relative preference, making it a useful regime and confirmation gauge.
How practitioners use it
Used as context among multiple indicators — never as a standalone signal to act.
Less common professional uses
Divergence: equities making new highs while the ratio stalls (because bonds are also bid) signals defensive hedging inside a rally — a subtle risk-off undercurrent. Rate-driven distortion: the bond leg reacts to duration and Fed expectations, so a falling ratio can reflect a bond-yield surge rather than true equity fear — check whether stocks or bonds are the mover. Percentile/z-score the ratio over a lookback; the raw level is arbitrary and only its position within its own range and its slope carry information.
Sources & provenance
Intermarket ratio analysis (educational overview); Portal desk education notes
This page is educational content published by Pachira Aquatica Global LLC. It is not investment advice and not a recommendation.