When the Bond Market Panics Like This…
Trump’s global tariff war has wiped out more than $5 trillion in equity-market value. But, as always, the most reliable clue about what’s heading our way is the bond market. Buckle up…
The meltdown in the equity markets continues to get the lion’s share of headlines: four days straight of around 3 percent declines, the worst since October 1987, followed by a buying frenzy on Wednesday after Donald Trump said he was enacting a 90-day pause on his “reciprocal” tariffs, except for China. But forget the equity markets for the moment. The more telling signal of the coming financial calamity can be found in the bond market.
Few people understand the machinations of the bond market, with its arcane argot and tendency toward inscrutability. But it’s the bond market that better telegraphs what the cost of capital will be, and how collective risk tolerances are changing, and how quickly. After all, when people start freaking out about whether they’ll get their money back, as contractually agreed by the government or by corporations, while also worrying about receiving contractually agreed interest payments, the shit really starts hitting the fan. That’s where we are now.
