Still, if one is watching CNBC to figure out where markets are headed, they may be better served to turn off the TV and look to the bond market for direction.

Today, real yields, or the bond yield less inflation expectations, helps explain the movement of many assets. If we are to form reasonable expectations for stocks, commodities, the dollar index, and gold prices, we best have an opinion on where real yields are going.

In this article, we share evidence supporting the recent strong relationship between real yields and risk assets. We then ponder where real yields are heading to help save you the confusion of trying to follow the conflicting bullish and bearish views presented on CNBC.

What Are Real Yields

The real yield is the yield an investor expects to receive after inflation. Think of it as the amount of purchasing power a bondholder expects to gain or lose. The inflation figure within the calculation is based on inflation expectations which are a byproduct of the difference between TIP yields and nominal yields.