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One of the many notable things about beating in the course of US markets is that US government bonds do not really pick up. This is not a good sign.
Treasons are usually yin to stock ‘yang. When the shares hit, the bonds generally jump as investors fly to the safer shores. They are known as risk -free property. This is a mechanism that has helped with many diverse portfolio over the decade, with only rare exceptions.
In this season’s fast market, the stock market, however, the Law on Balance was not quite functioned. US shares are a monster, which is 5 percent lower so far, and we are only half past March. We reduced 8 percent from mid -February. At the same time, bond prices have increased this year, but not dramatically. Most importantly, the reference 10-year-old US government bonds are now around the same level as late last month.
It tells you that this is a shock of feeling. It’s not an economy, stupid. That’s why it’s harder to fix. The information about the American economy is fluttering, but they are not terrible, certainly not as ugly as suggested by markets. American inflation slid back to 2.8 percent In February, a sign that the economy weakens a little, but not not thin.
But that is not really what he disposes of investors. “We are selling US property as we speak,” Michael Strobaek, Chief Investment Director at Swiss Private Bank Lombard Odier told me on Friday morning. “We are currently going through the pain of the pain.” This is a pretty switch. This time last year, Stobaek spoke of “geostrategic“The imperative to buy and hold American stocks. At the turn of this year, he was still comprehensive in American exceptionalism.
AND American economy He didn’t change his mind. Instead, this is what he calls us the “final provocation” of the Vice -President of JD Vance in Europe in his speech at a safety conference in Munich in February. Then it is a terrible treatment of Ukrainian President Volodymyr Zelenskyy in the White House days later. Then it was a threat to American tariffs against Mexico and Canada. “It is absolutely clear that they hit this agenda with a cloth,” Strobaek said. Now he withdraws from the shares, instead in the bonds and cash.
At some point, the constant overturn of the tariff policy from Trump’s administration will harm the real economy. The rich Americans are strongly exposed to sliding stocks now, so they will hit them in their pocket. Companies will retreat to consumption, in case they are randomly random and painful displacement of politics. Even more alarming for investors, uncertainty makes it difficult to prognosis of earnings with any condemnation, leaving fund managers Flying blind.
The mood is terrible. Trevor Greetham, head of multiple assets in the British management of Royal London Asset Management, noted that in his monitoring of feelings, which started until 1991, in the last few days it ranked on 50 more durable on the market he noticed. This period passes for days there up (or down, I suppose) with such fun episodes as the failure of the Lehman brothers, the euro crisis and for one for the Hipster Finance Hipster here-SMRT Long-term Hedge Capital Management Fund.
Again, Glaetham points out, it’s not an economy here. These are tariffs, geopolitics, uncertainty itself causes damage. And “Central banks are not there for you.” In other words, the federal reserves will not ride until the rescue, as it did, for example, the coined crisis five years ago.
If investors believed that the Fed Galop in a white horse would reduce the rates and repair the mess, the bonds would be much stronger than it is today. Instead, investors look forward to slower growth, a greater future for inflation that monetary policy cannot easily repair.
This does not leave a short -term catalyst to reverse this situation. Forbidding personality transplantation for the US president, an adult intervention in a room or a sudden fall in a real economy that triggers mass -fed cuts, has nothing to stop rot. “A knife falls in the territory,” Glaetham says.
Scott Besent Treasury Secretary rejected the impact of “a little volatility” in stock. The White House message is short -term pain for a long -term gain. Heavy weights on Wall Street from Goldman Sachs and Blackstone have this week praised potential climbs Trump’s beloved tariffs. I’ll have everything they have.
Even if the administration wanted to press the Fed to make a reduction, investors would view it as an invisible intervention in the independence of the central bank that would probably worsen things.
Everything has a price, and temporary bounces are in a wide fall are a couple for the course. At some point, US supplies can become cheap enough to wrap themselves in bid hunters. But at a ratio of prices and earnings of 24 times, compared to 17 in Europe, it is difficult to claim that we are still there. Funds managers remain with a scarce reason for optimism. Maybe US investors will not notice Trump’s proposed 200 percent of tariffs On a real French champagne, though.
katie.martin@ft.com
