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Everyone's freaking out about major markets moving up in unison, but history shows this is bullish

  • Stocks, bonds and gold are all higher the last three months.
  • Some investors worry bond and gold markets are signaling trouble ahead and that stocks will soon drop.
  • History shows that when the three move higher in unison, stocks continue higher.

There's been a lot of hand-wringing on Wall Street lately because stocks, bonds and gold prices are all moving higher together.

Traders and market pundits worry that the stock market is overlooking some real macroeconomic and political concerns that are giving a lift to the traditional safe havens: Treasurys and gold.

Put simply, they believe when safe-haven gold and bonds are going higher, things are not right with the world, and stocks should go lower.

But history shows this phenomenon of the three trading in unison ends up being bullish for stocks, proving equity investors correct who bought while the two other assets were supposedly flagging trouble ahead.

During the last three months, the S&P 500 is up more than 2.5 percent and setting records. Meanwhile, gold futures and the iShares 20+ Year Treasury Bond ETF, a proxy for the bond market, are both up about 6 percent in three months. The yield on the 10-year Treasury has gone from 2.52 percent on March 7 to 2.16 percent now and the overall yield curve, or spread between the yields, has flattened.

S&P 500, Gold ETF, Treasuries ETF -- Last 3 months

Using hedge fund quant tool Kensho, CNBC found 15 occasions during the last 20 years when stocks, bonds and gold all moved higher in a similar fashion in three-month periods. The exact parameters used were three-month periods where the S&P 500 rose 2 percent or more, gold jumped 5 percent or more and the 10-year Treasury moved higher, causing its yield to decline by 30 basis points.

So how does this situation usually resolve itself?

Over the next three months, the S&P 500 posted an average increase of 3 percent, moving into positive territory on 73 percent of the occasions, according to Kensho. On average, gold kept moving higher, too, while bonds declined, causing yields to back up slightly.

There are a couple possible explanations.

First, one could argue that bond and gold investors worry too much, while stock investors see a more optimistic picture of the world. Applying that to the current climate, bond and gold investors are fretting about President Donald Trump's stalled business-friendly agenda and some nerve-wracking foreign policy rhetoric, while stock investors see growing earnings and D.C. gridlock (no new regulations) as just fine for equities.

Bond investors would also argue this move higher in prices and lower in yields is because of real macroeconomic worries like the big miss in the jobs report last Friday. But stock investors saw that report as a blip amid a broader job growth trend.

Another explanation for why stocks end up being the ultimate winner — and why gold keeps going higher — is that there are often times when low yields provide fuel for a bull market and lift asset prices by allowing companies to borrow cheaply and buy back their own stock. Not to mention, when the level of yields is this relatively low and dropping, investors scramble into stocks for higher returns.

In other words, when rates are this low, keeping them low is fuel for a bull market.

Peter Tchir of Brean Capital pointed out to clients this week that something else may be at work and it's not necessarily bearish for stocks.

Investors may be using Treasurys as a hedge against equity positions and are buying more when stocks rise. They are doing this in lieu of buying put options — or the ability to sell at certain prices — hence why the CBOE volatility index has remained stubbornly low in the face of what seems to be rising risks, he said.

"Investors, rather than buying equity puts, or selling equities on weakness, are buying Treasurys to smooth returns," Tchir wrote in his report.

He and other market strategists point out that if the bond market were really worried about rising economic risks, then credit spreads would be widening. And they are not right now.

CNBC's parent NBCUniversal is a minority investor in Kensho.