Conventional U.S. assets are exhibiting erratic behavior amid ongoing U.S.-China trade tensions that are unsettling global markets, now exacerbated by new data revealing declining sentiment towards the U.S. economy and rising inflation worries.
The latest survey from the University of Michigan, released on Friday, indicated a drop in consumer sentiment to 50.8 from 57.0, approaching its lowest point in three years and significantly lower than levels recorded during the 2020 Covid lockdowns. Expectations for inflation over the next year surged to 6.7%, rising from 5% in the previous month and marking the highest reading since 1981.
Following this data release, investors renewed their selling of long-term U.S. government bonds and the dollar—assets that are typically viewed as safe havens. The yield on the 10-year Treasury rose above 4.55% during U.S. morning hours, climbing more than 50 basis points in just a week. In contrast, the dollar index (DXY) fell below 100, hitting a three-year low. Gold, on the other hand, reached a new peak price of $3,240 per ounce.
After experiencing considerable volatility in the previous sessions, U.S. stocks were trading within a narrower range around the unchanged mark on Friday. As of the latest updates, the Nasdaq saw an increase of 0.6%
In the cryptocurrency space, markets showed positive movement, with Bitcoin (BTC) hovering just above $82,000, marking a 4% increase over the last 24 hours. In addition, the broad-market CoinDesk 20 Index rose by 3%, driven by major altcoins Solana’s SOL and Avalanche’s AVAX, both achieving gains of 6%.
Signal or noise?
While some macroeconomic analysts express concern that the recent rise in government bond yields is casting a shadow over the future of the U.S. economy, others believe investors might be overly focused on short-term market fluctuations.
“U.S. dollars and U.S. government debt, two of the most liquid safe haven assets, are acting erratically,” stated Noelle Achison, an analyst and author of the Crypto is Macro Now newsletter, in a note on Friday. “However, this erratic movement does not apply to other safe havens, just those closely tied to the U.S.”
“I am inclined to think that the sharp movements in these asset classes can be attributed more to over-leveraged market players being forced to liquidate positions rather than being due to fundamental shifts,” commented billionaire investor Bill Ackman in a post on X.
“Technical factors are steering these dramatic market changes,” Ackman added. “Consequently, markets have become increasingly unreliable as short-term indicators of the effects of policy alterations.”
