well, i finally get why bond yields came down today
remember last week when bond yields were spiking and stocks were falling?
didn't make sense because when people sell stocks, they should buy bonds to go into safety, which would cause yields to come down
well, why did they buy bonds today?
Chair Powell made one thing very clear:
there isn't a Fed put. he's not cutting to save the market.
so when will he cut if the tariffs are going to halt the progress on inflation?
basically...when growth slows down enough, aka...recession or close to recession.
if you take him at his word, you'd want to lock in your yield right now because you are afraid that by the time growth does slow down, the Fed will cut and it'll be too late as yields will have come down enough given most people will have left stocks for bonds...so buying bonds now makes sense.
as a result of Powell being hawkish around a cut...because he doesn't feel any of what's happening right now is his fault...he got people to feel more comfortable in buying bonds today.
great for credit markets, not the best for stocks.
best case scenario for stocks now is we get trade deals done, hopefully with China, walk back the tariff rates, companies keep putting up good earnings (even if Q2 might not be the best) and inflation continues to come down...but most of this can only happen if the tariff volatility subsides.
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