In the first trading day of the new year, U.S. financial markets were bogged down by the almost universal view that a recession is approaching.
A stocks rally fizzled out within the first 30 minutes of opening gains. Gold, a traditional safe haven, touched its highest level in six months, rising alongside silver and platinum. And 10- to 30-year Treasury yields, nestled in what’s known as the long end of the bond market, fell as investors jumped in — driving their respective yields down to around 3.8% and 3.9%.At the heart of the market moves was the strong sense that an economic downturn is all but inevitable at this...
At the heart of the market moves was the strong sense that an economic downturn is all but inevitable at this point, following months of central bank interest rate hikes around the world — with the International Monetary Fund‘s chief Kristalina Georgieva warning that the economies of the U.S., European Union and China are all slowing simultaneously. Scion Asset Management founder Michael Burry said he expects another “inflation spike” after recession rocks the U.S.
“We see stock rallies built on hopes for rapid rate cuts fizzling. Why? Central banks are unlikely to come to the rescue in recessions they themselves caused to bring inflation down to policy targets. Earnings expectations are also still not fully reflecting recession, in our view.
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