uploads///Trade war risk

What’s Spooking Bond and Stock Markets?

By

Dec. 4 2018, Updated 4:55 p.m. ET

Bond markets versus stock markets

Usually, bond markets (BND) more accurately predict future market moves than do stock markets. Bond markets seem to be worried about future growth despite the recent 90-day US-China (SPY) (FXI) trade war truce. Euphoria from the truce seems to be wearing off, and investors are waiting for more details about how the talks between the two sides could progress. Today, stock markets opened lower, with the S&P 500 (SPY) down 0.62%, the Dow Jones Industrial Average (DIA) down 0.70%, and the NASDAQ Composite (QQQ) down 0.55% as of 10:15 AM Eastern Time.

Article continues below advertisement

Stock markets get spooked

Stock markets (QQQ) (DIA) have also been spooked by the inversion of part of the yield curve (TLT). While investors were previously quite bullish on the prospects of the US economy in 2019, recent data and the yield curve inversion have put those prospects into question. Leading US indicators, such as business investments and housing data, are forecasting slower economic growth, and US earnings growth and margins may have peaked as the sugar high of tax reforms wears off.

Reasons for inversion

There could be several reasons for the yield curve’s flattening, with some being temporary. According to CNBC, one reason could be that pension funds are buying ten-year Treasuries as safety bets. Other reasons include easing inflation fears making ten-year bonds more attractive, and US-China trade uncertainty.

Advertisement

More From Market Realist

  • Open sign on a sidewalk
    Macroeconomic Analysis
    Top Reopening Stocks to Play the Shifting Market Sentiment
  • Morgan Stanley sign and stock numbers
    Macroeconomic Analysis
    Morgan Stanley's Buyback Stock Picks in 2021
  • Black Wall Street sign is sign of ethical investing
    Macroeconomic Analysis
    Ethical Investing Stocks and Funds for Your 2021 Portfolio
  • New York City skyline and Goldman Sachs logo
    Macroeconomic Analysis
    Goldman Sachs: Options Trade Picks to Play Earnings Season Volatility
  • CONNECT with Market Realist
  • Link to Facebook
  • Link to Twitter
  • Link to Instagram
  • Link to Email Subscribe
Market Realist Logo
Do Not Sell My Personal Information

© Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.