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 drawing a parallel between current bond-market conditions and the summer of 1987, just months before "Black Monday." His observation centers on bonds beginning to deliver what he describes as "equity-like returns" — a shift in the risk-and-reward balance between the two asset classes.

The historical echo matters because in 1987, the bond market moved first. Before equities cracked, yields and bond returns signaled that investors were being compensated differently for risk, a warning that equity valuations looked increasingly stretched relative to fixed income. McDonald's point is not a prediction of a repeat, but a reminder that cross-asset signals can carry information that stock indexes alone do not.

For market watchers, the takeaway is to monitor the bond-equity relationship rather than treat each market in isolation. When bond returns start to rival equity returns, the relative appeal of stocks can shift, and that repricing can happen quickly. The comparison to 1987 is a caution about complacency, not a forecast — the value lies in watching whether the bond market continues to send the same signal.