The NASDAQ Composite Index fell 0.63%
The tech-heavy NASDAQ Composite Index (QQQ) fell for the third time in four sessions on March 27. The index fell 0.63% on the day as Treasury yields fell further.
On March 27, the ten-year Treasury (IEF) yield fell to 2.35%, its lowest point since December 2017. Treasury bond prices have been rising. Investors flee to safe havens such as Treasuries in risk-off situations.
Stocks and Treasuries have been moving in the same direction in the past few months, contrary to what they’ve done historically. While stocks have headed up, investors have hedged their risky assets with Treasuries due to the numerous risks equities have been facing.
Stocks and Treasuries are beginning to move in opposite directions
In the last few sessions, there have been signs of the two assets beginning to move in opposite directions. Treasury yields have declined very quickly due to even more signs of a slowdown in the United States and around the world, which could put more pressure on earnings growth.
Risks to equities include high valuations despite numerous companies’ announcing weak outlooks for the year, the global slowdown, political risks, and uncertainties related to the US-China trade war.
The stock markets have been ignoring these risks for most of the year, but quickly falling Treasury yields have caused investors to become more cautious.
In the short term, something that could cause stocks to rebound is a positive outcome from the US-China trade negotiations, which are set to continue soon.