Markets Are Still Worried

Gold Is Proof

The markets used this week’s relative lack of surprises to pull buyers back in and send the major averages significantly higher. Inflation numbers came in about as expected. Producer prices came in about as expected. Consumer sentiment edged slightly higher. The ECB completed a quarter-point rate cut as expected. It was the kind of calm-inducing results that many investors had been looking for following a week where we got several signs that the labor market was weakening and starting to take the global economy down with it. This past week didn’t really resolve any of the longer-term issues facing the markets and the economy right now, but the brief respite at least seemed to put investors in a better mood.

Go beyond just the S&P 500 and the Nasdaq 100, which each gained more than 4%, and you can clearly see that the markets are still worried. Treasury yields are still heading lower, a sign that investors are likely still building safe haven positions in the background. Gold prices continue to set new all-time highs. The yen is still pushing higher, a sign that traders may be covering their short positions again. This feels like a little bit of a relief rally for the major averages, but things, such as bonds, precious metals and commodities, are still failing to act as if conditions have meaningfully improved.