Bond Turmoil
It was the best week for US equity markets since 2023. However, economic, market, and business outlooks are as unclear now as they were during the pandemic, fueled by China's retaliatory actions and Trump's fast-evolving trade policy. Tech was the top performing sector in the US, Real Estate was the worst.
It was a concerning week for the bond market. US yields up 50 bps, 38 bps in Canada. Fears of a US bond market crisis mirroring the UK's post-Truss budget. Gold had an excellent week as investors were frightened by the bond market turbulence. The USD also had a terrible week.
Looks like we should expect more Trump induced volatility this week. On Sunday, Trump walked back the exceptions that caused the market to rally on Friday. (@TheStalwart)
The confusing part, there was an official executive order for the goods exempted from the Chinese tariffs. Nobody knows what is going on… (@RealJimChanos)
It was the largest rise in 10Y yields since 2021. (@biancoresearch)
The intra week move was only matched by the Covid crisis and the global financial crisis. This is good context into the unprecedented moves last week despite the positive week for equities. (@MikeZaccardi)
Historically, during periods of crisis and uncertainty the dollar would rally and yields would fall; that didn’t happen this week. Whether it’s concerns over tariff driven inflation, the US’ fiscal deficits or the US losing global trust, it’s a major concern that the US is not being treated as a safe haven. Gold was a beneficiary of this breakdown and could continue to be. (@JustinWolfers)
Last week's promising US inflation data provoked market concerns about an economic slowdown and potential recession. (John Authers)
Inflation is only being driven by services at this point. (John Authers)
Americans want factories to come home but nobody wants to work in one. (@FrankLuntz)
America's wealth concentration has created a precarious economic dynamic where the top 10% now drive over half of consumer spending. The recent sell-off could pull back spending driven by the wealth effect. (BofA)
Retail investors' speculative appetite remains strong, driving increased investment in leveraged ETFs during the recent volatility. (@gnoble79)
Energy equity drawdown could have further to go. Energy typically underperforms from the business cycle peak through the initial downturn, recovers during the recession's later stages, and outperforms in early-cycle recoveries. Seasonality also presents a headwind. (The Crude Chronicles)
