Investors Flee to Gold and Bonds Amid Growing Fear of a Broad Economic Slowdown
Investors Flee to Gold and Bonds Amid Growing Fear of a Broad Economic Slowdown
By:JJ Kinahan
Volatility remains contained, but potential panic selling could present buying opportunities
- Stocks are struggling amid economic uncertainty, with the tech sector hit hard. Investors are seeking safe havens.
- Gold prices and falling bond yields signal investors’ caution as market weakness persists.
- Orderly selling continues, but potential panic selling could create opportunities for resilient stocks.
After four consecutive weeks of losses, stocks are attempting to rebound. However, most major indices closed slightly lower yesterday.
Market sentiment remains clouded by a combination of tariffs and broader economic uncertainty, leaving investors searching for price equilibrium. The struggle to find stability underscores the challenges the market faces.
Market weakness is widespread, as indicated by the number of stocks trading above their 50-day and 200-day moving averages. Only 37% of stocks remain above their 50-day moving average, while 42% are above their 200-day average.
Decline is stock prices suggests downturn
A deeper dive reveals the technology sector has taken the hardest hit. Companies such as Amazon (AMZN), Apple (AAPL) and Meta Platforms (META), have each declined roughly 20% from recent highs. The decline is noteworthy because these companies are not the usual suspects when discussing tariff-related concerns.
This suggests the current market downturn is not driven solely by trade policies but may also reflect a broader economic slowdown.
Trends in gold prices and bond yields also support concern over economic weakness. Gold continues to trade above $3,000, while bond yields have steadily declined. Both assets are traditionally considered safe havens during times of economic distress. The movement of capital into gold and bonds suggests investors are seeking security amid declining confidence in equities.
In addition, Federal Reserve Chair Jerome Powell provided further insight into the state of the economy this week during his press conference after the Federal Open Market Committee (FOMC) meeting. Powell expressed uncertainty regarding future economic conditions, a sentiment echoed by investors and by corporate executives as they release earnings reports.
Mixed results in earnings reports
On the earnings front, yesterday’s reports from FedEx (FDX), Nike (NKE) and Micron Technology (MU) highlighted diverging outlooks. While Micron projected a strong future, both Nike and FedEx issued more cautious outlooks because of economic uncertainty. In premarket trading, all three stocks were down, with FedEx experiencing the steepest decline at 8%.
One notable aspect of the current sell-off is its orderly nature. Despite sustained market weakness, volatility has not surged to panic levels. The VIX index has yet to break and hold above 30, a threshold typically associated with widespread panic selling.
However, if the market continues its downward trajectory, panic selling may still emerge. Should that happen, investors may find opportunities in stocks that demonstrate resilience.
Today marks a triple witching event, where options, futures, and options on futures expire. Such expirations can introduce additional volatility. Meanwhile, beaten-down stocks in emerging sectors, such as nuclear energy provider Oklo (OKLO) and quantum computing firm Rigetti Computing (RGTI), may hold long-term potential.
Investors should remain focused on their strategies and objectives amid ongoing uncertainty.
JJ Kinahan is CEO of tastytrade from IG—which includes tastylive, tastyfx and tastycrypto. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan
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