Stunning correlation between the 10-year and S&P 500 could point to new highs for stocks

The bond market is celebrating a milestone. Two years ago this month, the 10-year Treasury yield bottomed out at a once-in-a-generation low of 1.36 percent.

Since then, the yield has more than doubled to around 3 percent.

Against common thinking, one strategist says this is not necessarily a bad thing for stocks.

��What have we heard, though, really for two years? Higher rates are worrisome and it��s a concern for stocks,�� Ryan Detrick, senior market strategist at LPL Financial, told CNBC��s ��Trading Nation�� on Tuesday. ��But when you take a look at history, that��s not the case.��

During the 23 times the 10-year Treasury yield rose since the early 1960s, the S&P 500 moved higher more than 80 percent of the time.

��Even more significantly, since 1996 (so more recently) 11 periods with the higher trending 10-year yield, every single time, all 11 times, the S&P 500 also went higher,�� added Detrick.

Of those 11 times, the S&P 500 rose by an average 9.5 percent, according to LPL Financial research. Since the 10-year yield hit its multiyear low in July 2016, the S&P 500 has risen roughly 34 percent.

��Should the 10-year break out above 3 percent to new highs, that could be a surprise for a lot of people, it could be really bullish for the S&P 500 going forward,�� said Detrick.

Investors�� concern over a flattening yield curve is also not as damaging to stocks as common wisdom suggests, says Detrick.

��The last time we saw yields going higher with the yield curve flattening was the mid-90s,�� he said. ��We��re not going to have an inverted yield curve any time soon in LPL Financial��s point of view. It could stay flat potentially for a couple of years, kind of like those mid-90s, and the economy could continue to grow along with stock prices.��

An inverted yield curve, typically seen when a bond with a shorter-term maturity has a higher yield than the 10-year, is often interpreted as a sign of an impending recession. The 2-year/10-year yield curve inverted in May 1998 and it was 22 months and a gain of nearly 40 percent before the S&P 500 hit its peak, according to LPL Financial.

The 2-year/10-year yield curve was 32 basis points wide on Tuesday. The spread hit a multiyear low of 24 points earlier this month.

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