#MacroFriday: From 'Yippy' to 'Yippee': Market's Mood Swings
Well, that escalated quickly! Recent trading days have been a rollercoaster, and definitely not for investors with a weak stomach.
Last week’s reciprocal tariff announcement sent shockwaves through financial markets, plunging major equity indices into bear market territory. But after the POTUS announced a pause on reciprocal tariffs (except for China), US equity indices posted their largest single-day gain since 2008, with the S&P 500 surging 9,5% on Wednesday. This followed a 12% drop in the index since April 2. US president Trump’s rationale for the pause? “People were getting a little bit ‘yippy’”.
This time, the US dollar and Treasuries did not act as safe havens during the turbulence in financial markets. The 10-year Treasury yield rose from 3,86% to 4,48% in just three trading sessions. Even after the tariff pause, this yield settled only slightly lower at 4,3%.
In times of stress, long-end yields typically drop. Instead, the 30-year yield remains at the highest level since before the GFC. This is a strong signal of waning global confidence in US policies. Risk-free rate, anyone?
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