Treasury yields are closing in on an inflection point where, historically, stocks and bonds have reinforced losses in one another. That points to a regime shift of higher bond and stock volatility and wider credit spreads.
High indebtedness has prompted a call for France to cancel part of its public liabilities. Ideas spread, so expect similarly unorthodox demands elsewhere as governments grapple with high debt, while political disruptors air increasingly unconventional policies. All those roads, however, lead to more inflation and the debauchment of financial assets.
Corporate bonds are exposed to abrupt downside as liquidity providers are increasingly replaced by liquidity takers.
Stocks in the US seem unstoppable but investors shouldn’t be complacent because there are a number of markers suggesting the rally is more fragile than it seems.
Selloffs in Treasuries are compounded by the real loss in the purchasing power of the dollars they are denominated in.
Soaring corporate profits are a big part of the inflation problem, and keeping interest rates high is the best way to rein them in, according to Bloomberg’s latest poll of professional and retail investors.
Tighter Federal Reserve policy is raising households’ interest-rate burden, leading to a rapid decline in excess savings and underscoring the likelihood hawkishness has peaked.
US equity earnings are behaving similarly to the run-up to previous recessions, tallying with multiple leading indicators showing the US is on track for an economic slump.
