Triple Threat

When Stocks, Bonds, and Dollar Decline Simultaneously

And just like that, we’re back in a period of great uncertainty.

In May, investor sentiment was improving. The AAII report showed the percentage of bulls in this market steadily increasing. Business confidence was also showing signs of a rebound. The May manufacturing and services PMI report both showed a healthy jump further into expansion. The U.S. equity market had been moving higher, believing that the pause in reciprocal tariffs could eventually be made permanent and help the economy avoid recession.

Turns out tariffs may be back on again. President Trump once again reversed course and threatened a blanket 50% tariff on the European Union, claiming that not enough progress was being made on the trade front, and a 25% tariff on Apple if iPhones weren’t manufactured in the United States.

Not surprisingly, the markets didn’t take the news well and capped off a decidedly negative week for stocks. The 10-year Treasury yield moved back above the 4.5% level, continuing a trend of volatility and mixed correlations with equities, while gold shot higher by 5% on the week and the dollar resumed its decline.

When stocks, bonds and the dollar are all declining at the same time, there’s some sort of disconnect happening. It’s being caused by a combination of fiscal conditions, debt conditions, inflation concerns and the general uncertainty that comes from a global trade policy that swings back and forth on a whim. And it’s marked a return to pre-tariff pause times. We’re seeing the anti-America trade pick up again, international stocks begin to outperform and gold re-emerge as the safe haven asset.