A great day for safe-haven assets
The stock market rebounded Wednesday, with major U.S. indexes finishing the day slightly higher or little moved from where they opened, but prices on safe-haven assets like gold, the Japanese yen and U.S. government debt continued to rise.
What happened: Gold prices rose to a 6-year high, above $1,500 per troy ounce, while the yen broke through 106 per dollar, nearing a 5-month high, and U.S. Treasury prices rose, taking down yields on the benchmark 10-year note below 1.6% in early trading.
But, but, but: Stock traders are still buying the dip. When President Trump again escalated the trade war by threatening new tariffs on China last week, Bank of America Merrill Lynch strategists said investors were "big net buyers" of U.S. equities. The bank saw its second highest equity net inflows on record.
Be smart: The continued momentum of assets seen as safe has heated up and looks poised to continue.
- Investors have been buying bonds and diving into money market funds all year, with the recent pickup in the trade war and expectations for lower central bank interest rates around the globe driving further purchases.
- Negative yields have not sapped investor appetite at all. Deutsche Bank says $15 trillion of bonds around the globe now charge buyers to invest, rather than paying them.