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One of the many notable things about the beating in the United States stock markets is that the United States government bonds are not really collecting the slack. This is not a good sign.
Treasury bonds are typically the yin of Yang actions. When the shares receive a blow, the bonds generally jump as investors go to the safest coast. They are known as the “risk -free” asset after all. This is a mechanism that has helped many diversified portfolio during the decades, with only rare exceptions.
However, in the rapid shaking of the stock market this month, the act of balance is not working at all. American actions are being monstruated, 5 percent less than this month so far, and we are only in the middle of March. We have fallen 8 percent since mid -February. At the same time, bond prices have increased during this year, but not dramatically. Crucially, 10 -year -old United States government bonds are at approximately the same level now as at the end of last month.
This tells you that this is a feeling shock. It is not the economy, stupid. That makes it more difficult to fix. The data on the economy of the United States are wobbly but not terrible, certainly not as ugly as the shaking of the markets would suggest. United States inflation returned to 2.8 percent In February, a sign that the economy is weakening a bit but not the tank.
But that is not really what is postponing investors. “We are selling American assets while we talked,” Michael Strobaek, Swiss Investment Director Private Bank Lombard Odier told me on Friday morning. “We are going through the pain valley right now.” This is a change in sight. This time last year, Strobaek was talking about the “Geestratic“Imperative to buy and have actions from us. Earlier this year, everything was still in American exceptionalism.
He American economy He has not changed his mind. Instead, it was what the vice president of the “final provocation” of Europe in his speech at the Munich Security Conference in February calls us. Then it was Donald Trump’s horrible treatment to Ukrainian President Volodymyr Zelenskyy in the White House days later. Then it was the threat of American tariffs against Mexico and Canada. “It is absolutely clear that they are arriving at this agenda with a deck,” Strobaek said. Now it is withdrawing from actions and bonds and effective.
At some point, the Flip-Flop constant in the Trump administration policy will harm the true economy. The rich Americans are strongly exposed to stocks now sliding quickly, so this will hit them in their pocket. Companies will withdraw the expense, in case they are beaten with a random and painful policy change. Even more alarming for investors, uncertainty makes it very difficult to make earnings with any condemnation, leaving fund managers Flying blind.
The mood is terrible. Trevor Greetham, Chief of Multiple Assets at the Royal London Asset Management of the United Kingdom, said that in its feelings tracker, which dates back to 1991, the last days are classified as the 50 most gloomy in the market they have observed. This period is producing days just there (or below, I suppose) with episodes as entertaining as the failure of Lehman Brothers, the euro crisis and, one for finance hipsters here, the disappearance of the long -term capital management coverage fund in 1998.
Once again, Greetham points out, it is not the economy that is suffering here. They are tariffs, geopolitics, uncertainty in itself doing damage. And “the central banks are not there for you.” In other words, the Federal Reserve will not lead to the rescue as it did, for example, in the Covid crisis five years ago.
If investors believed that the Fed would gallop a white horse to reduce rates and fix the disaster, the bonds would be remarkably stronger than they are today. Instead, investors are looking at a slower growth, a future of greater inflation that monetary policy cannot easily fix.
That does not leave a short -term catalyst to change this situation. Except for a personality transplant for the president of the United States, an adult intervention in the room or a sudden accident in the real economy that causes mass food cuts, there is nothing that stops rot. “We are in the knife territory,” says Greetham.
The Secretary of the Treasury, Scott Besent, has dismissed the impact of “a little volatility” on actions. The White House message is short -term pain for long -term gain. The heavy weights of Wall Street by Goldman Sachs and Blackstone have this week praised the possible ascending of the dear Trump tariffs. I will have what they are having.
Even if the administration would like to press the Fed to make cuts, investors would consider an insecure intervention in the independence of the Central Bank that would probably worsen things.
Everything has a price, and temporary rebounds in broad decreases are even for the course. At some point, US actions can become cheap enough to pull bargain hunters. But to a ratio to profits of 24 times, compared to 17 in Europe, it is difficult to argue that we are still there. Fund administrators remain with a scarce reason for optimism. Maybe American investors will not notice Trump’s proposal 200 percent tariff In the appropriate French champagne after all.
katie.martin@ft.com
