After exploding out of the starting gate a few weeks ago, the paper markets are getting a big smack in the face this week.
Stocks slumped for a third straight session yesterday, as the S&P declined by 0.8%, and it’s now down 2.5% for the week – on track for the first negative week of the year.
On the other hand, Treasuries have done well this week. Remember that bond prices move in the opposite direction of their yields (thus, falling yields mean rising prices).
The benchmark 10-year yield, which started this holiday-shortened week at just shy of 3.5%, took a nosedive on Wednesday and is now poised to finish the week about 10 basis points lower – at 3.4%.
Notably, the 10-year vs. the 2-year yield curve inversion (3.4% vs. 4.2%) continue to signal that investors at best see the Fed reversing course over the coming year and reducing rates. At worst, they see a coming recession.
The 10-year vs. 90-day yield inversion is even greater.
In the precious metals market, gold is up 0.7% for the week and is up 5.6% since January 1st. Silver is slightly up for the week (0.2%) but is slightly down since the start of the year (0.3%).