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Traditional U.S. assets are going haywire as U.S.-China trade tensions continue to rattle global markets, now coupled with fresh data of tumbling sentiment towards the U.S. economy and mounting inflation concerns.
The most recent University of Michigan survey, published on Friday, found that consumer sentiment fell to 50.8 from 57.0, nearing the most depressed level in three years and far below that seen during the 2020 Covid shutdowns. Year-ahead inflation expectations surged to 6.7%, up from 5% in the prior month and the highest read since 1981.
On the back of the data, investors resumed selling long-term U.S. government bonds and the greenbacks, two assets traditionally considered as safe havens. The 10-year Treasury yield soared above 4.55% during U.S. morning hours, up more than 50 basis points in just a week. Meanwhile the dollar index (DXY) sank below 100 to a three-year low. Gold, meanwhile, hit a fresh record of $3,240 per ounce.
After a wildly volatile past few sessions, U.S. stocks were trading in a far tighter range on both sides of unchanged on Friday. At press time, the Nasdaq was higher by 0.6%
Meanwhile, cryptocurrency markets were moving higher, with bitcoin (BTC) holding just above $82,000, gaining 4% over the past 24 hours. The broad-market CoinDesk 20 Index was up 3%, with altcoin majors Solana's SOL, Avalanche's AVAX leading with 6% gains.
Signal or noise?
While some macroeconomic analysts are fearful that the recent surge in government bond yields is threatening the future outlook of the U.S. economy, others believe investors are reading too much into short-term market swings.
"U.S. dollars and U.S. government debt, two of the market’s most liquid safe haven categories, are going haywire," Noelle Achison, analyst and author of the Crypto is Macro Now newsletter, said in a Friday note. "This is not the case for other safe havens, however, just those directly tied to the U.S."
“I believe that it is much more likely that recent sharp moves in these asset classes is due to highly leveraged market participants being forced out of positions than due to fundamentals,” said billionaire investor Bill Ackmann in a post on X.
“Technical factors are driving the dramatic market moves," Ackman continued. "As a result, markets have become increasingly unreliable as short-term indicators of the impact of policy changes."