The August sell-off in stocks has investors rushing to the relative safety of bonds, sending the yield of the benchmark 10-year Treasury note to its lowest in nearly three years.
"The bond market is screaming that the economy is slowing; that the trade war is going to escalate," said Jim Bianco, president and macro strategist at Bianco Research.
Bianco told Cheddar on Wednesday, as the Dow Industrials traded lower by nearly 300 points, that treasury yields are telling economists something that the stock market is not. The combination of trade concerns, a cooling global economy, and the Fed's seeming unwillingness to keep cutting rates is flashing warning lights for the U.S. economy.
For those who would point to relatively strong corporate earnings, a 50-year low in unemployment, stable inflation, and high consumer confidence, Bianco responded that those are all "backward-looking" indicators that "discount where we're going." The bond market, however, show "where we're going."
The Fed Funds rate ー which currently is close to 2 percent after last month's rate cut ー may seem low historically, but Bianco said that it's all relative. "It's actually high because it's higher than every other interest rate in the world." In his argument, more rate cuts are in order sooner rather than later because while the Fed can be too late to act, it can't be too early. If further rate cuts now don't help the economy, rate cuts later won't either, he said.
"It's either going to work now or it's not going to work at all."
The market, for its part, is pricing in five rate cuts between last month and next year, which Bianco said is not even remotely the consensus of economists. It's rare ー and worrisome ー that the market is pricing in an extreme like that.
Meanwhile, bond yields continued to move lower in the UK and Germany ー a sign that the flight to safety for fixed-income traders is not isolated to the U.S. and that a trade war with China that continues to show no end in sight is increasingly a global sign of worry about what's to come.
Wealthfront’s CFO Alan Iberman talks the $2.05B IPO and the major moment for robo banking as the company bets on AI, automation, and “self-driving money."
A rare magnum of Dom Pérignon Vintage 1961 champagne that was specially produced for the 1981 wedding of Prince Charles and Lady Diana has failed to sell during an auction. Danish auction house Bruun Rasmussen handled the bidding Thursday. The auction's house website lists the bottle as not sold. It was expected to fetch up to around $93,000. It is one of 12 bottles made to celebrate the royal wedding. Little was revealed about the seller. The auction house says the bids did not receive the desired minimum price.
The New York Times and President Donald Trump are fighting again. The news outlet said Wednesday it won't be deterred by Trump's “false and inflammatory language” from writing about the 79-year-old president's health. The Times has done a handful of stories on that topic recently, including an opinion column that said Trump is “starting to give President Joe Biden vibes.” In a Truth Social post, Trump said it might be treasonous for outlets like the Times to do “FAKE” reports about his health and "we should do something about it.” The Republican president already has a pending lawsuit against the newspaper for its past reports on his finances.
OpenAI has appointed Slack CEO Denise Dresser as its first chief of revenue. Dresser will oversee global revenue strategy and help businesses integrate AI into daily operations. OpenAI CEO Sam Altman recently emphasized improving ChatGPT, which now has over 800 million weekly users. Despite its success, OpenAI faces competition from companies like Google and concerns about profitability. The company earns money from premium ChatGPT subscriptions but hasn't ventured into advertising. Altman had recently announced delays in developing new products like AI agents and a personal assistant.
President Donald Trump says he will allow Nvidia to sell its H200 computer chip used in the development of artificial intelligence to “approved customers” in China. Trump said Monday on his social media site that he had informed China’s leader Xi Jinping and “President Xi responded positively!” There had been concerns about allowing advanced computer chips into China as it could help them to compete against the U.S. in building out AI capabilities. But there has also been a desire to develop the AI ecosystem with American companies such as chipmaker Nvidia.
