Then, on Wednesday, the 2s10s inverted, sparking a recession cacophony which will surely reach the ears of the president, leading to shrill cries for rate cuts. (God forbid #Recession starts trending on Twitter and he sees it.)
We wrote those mildly humorous lines on Wednesday morning, amid yet another ferocious bond rally that pushed 30-year yields in the US to record lows and ushered in the only yield curve inversion that ever makes headlines outside of financial circles – the 2s10s.
Fast forward to Wednesday afternoon, and sure enough, #TrumpRecession was trending. (AOC was tweeting about it, which must have been insult to injury for the White House.)
By the time the closing bell sounded on Wall Street, it was another bloodbath for US stocks. The Dow plunged 800 points as investors and traders anguished about a potential recession and debated the extent to which relentless bull-flattening proves Jerome Powell’s Fed is woefully behind the curve – figuratively and literally.
The UK 2s10s inverted as well and lackluster data out of China and Germany drew a bright, red line under growth concerns. So manic was the bond rally on Wednesday morning that ultra-long futures tripped the extended hours circuit breaker.
The selloff on Wall Street must have been a bitter pill for Trump to swallow. After all, it was just Tuesday when the White House delayed tariffs on some key consumer items until December in order to calm markets, which had sold off sharply to start the week in a repeat of the previous Monday’s harrowing plunge.
But alas, it looks as though the president might have pushed the envelope too far. The 2s10s genie is out of the bottle, and as alluded to above, that’s one yield curve inversion that tends to make national headlines even outside of market-focused media outlets.
Wednesday marked the seventh session since the July FOMC meeting that the S&P has moved 1% or more in either direction.
It was the second-worst day of the year for the benchmark and it came just barely over a week after the gauge’s worst session.
Energy and financials were summarily routed. In fact, it was the worst day for financials since early December.
Treasurys held gains and the “rage” bull-flattener was the order of the day. The 2s10s and the 5s30s were flatter by some 3bp and 4bp, respectively. 10-year yields ended around 1.58%, with yields lower by more than 13bps.
The VIX obviously spiked and Wednesday was the fourth-worst day of the year for big-cap tech.
Wilbur Ross and Peter Navarro tried to do some damage control on Wednesday morning. Ross was unconvincing. Peter made things worse.
39 minutes before the closing bell, Trump lost it. “We are winning, big time, against China. China is not our problem, though Hong Kong is not helping”, the president tweeted, before getting to the heart of the issue.
“Our problem is with the Fed. Raised too much & too fast. Now too slow to cut”, Trump said.
Then, he delivered the grand finale – the coup de covfefe, if you will. Take it away, sir:
Spread is way too much as other countries say THANK YOU to clueless Jay Powell and the Federal Reserve. Germany, and many others, are playing the game! CRAZY INVERTED YIELD CURVE! We should easily be reaping big Rewards & Gains, but the Fed is holding us back.
We will Win!
Maybe. But not on Wednesday, a day when #TrumpRecession was trending on the president’s favorite social media outlet and a day when his favorite job performance barometer suffered its worst loss of 2019.