Black Monday’s stock-market warning signal came from the bond market, and it’s back, says Wall Street veteran

Larry McDonald, a Wall Street veteran, is pointing to the bond market as the source of a warning signal reminiscent of the summer of 1987, just before the "Black Monday" crash. His observation centers on bonds beginning to deliver "equity-like returns," a dynamic he compares to that earlier period. The comparison is notable because the 1987 episode is often remembered for the speed at which equity markets repriced, with the bond market's behavior cited as an early clue.

For markets, the relevance lies in what bond yields and returns can signal about risk appetite, inflation expectations, and the cost of capital that underpins equity valuations. When bonds offer returns more typical of stocks, the relative appeal of equities can shift, and that relationship has historically preceded periods of volatility.

What to watch: whether the bond market's current behavior persists and how equity investors respond to competing yields. The comparison is a historical analogy, not a forecast, and should be weighed alongside other indicators rather than treated as a standalone signal.