US Markets Flash Warning Signs
That’s right, people, warning signs have started to emerge in US markets as the S&P 500 teeters on the brink of a key technical level, yield curves invert and investors seek safe haven in treasuries. Scary times!
Opportunities to buy the dip are drying up at a rate of knots as US equities struggle to find traction in a market that got off to one of the strongest starts on record. The re-emergence of the US-China trade war has brought back fears of a prolonged downturn, and with it, a number of scary technical warning signs for investors.
The VIX volatility index has ticked up 15.19% this month, peaking at a whopping 29% surge after talks broke down near the start of the month. This stopped the S&P 500’s epic run of form dead in its tracks, driving equity returns lower across the board. As it stands, the S&P has crossed slightly below a key psychological price level at $2,800, with plenty more downside on offer if stocks cannot regain a strong footing above the level.
While equities have been plummeting, investors have been diving headlong into treasuries for safe haven from the stock slide. The mad dash for safety caused another serious warning sign to flash red – a yield curve inversion. Historically, an inversion of the 3-month and 10 year treasury curve is known as the doomsday bell for an impending US recession.
This latest inversion went 9.2 basis points into the danger zone to levels last seen in 2007. Yikes! Nevertheless, while these signals are often predictors of bad times to come, many analysts are still of the opinion that good fundamental news can break the downtrend. Let’s hope some comes about soon!
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