Panic: The Bond Market Flashing Warning Signs

Panic has resumed in a big way.

A day after a brief respite, the Dow Jones Industrial Average just plunged 500 points, forcing it below its 200-day moving average.  And unless we see near-term calm, the Dow could easily test prior support at 24,680 – a nearly 1,000-point drop from current levels.

All as a drop in global bond yields raise concerns about a slowing economy.

At the moment, the 10-year Treasury yield has slid to its lowest level at 1.595% after starting August 2019 above 2%.  That move narrowed the yield curve, a widely watched recession indicator. “A sharp decline in yields as the 10-year note falls under 1.65%. This is raising the ‘Fear Factor’ over the impact of the trade war on the economy,” Peter Cardillo, chief market economist at Spartan Capital Securities told MarketWatch.

Those yields began to plummet following a bigger than expected rate cuts from central banks in New Zealand and India, and unexpected easing from Thailand, as well.  All underscore growing concerns about a sizable slowdown in global economic growth.

Gold was the Biggest Winner of the Day

As fear grips the market, investors are heading back into the safe haven of gold.  In fact, it’s why gold prices just hit $1,503 an ounce for the first time in six years.  With a good amount of uncertainty in terms of global economic growth, gold could see further support.

At the moment, the Dow Jones Industrial Average is down 353 points on the day.  The NASDAQ has lost 44, as the S&P 500 drops 46.

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