Markets continue to be hyper-focused on Federal Reserve policy, trading lower today.
Growth and value performed similarly as sentiment soured.
The U.S. 10-year yield has passed 3.5 percent, in anticipation of higher Fed interest rates, while the 2-year yield has reached a new 15-year high.
The 10-year minus 2-year yield curve is still firmly inverted, as bond investors expect aggressive Fed policy to tip the U.S. economy into a recession.
Oil prices have stayed range-bound between $80 and $90 and traded around $86 today, while natural gas has fallen from a recent high of more than $10 million BTUs to around $7.7 today.
On the international front, European shares weakened while Asian stocks traded higher.
The dollar was mixed against a basket of currencies.
Cryptocurrency performance today and over the course of this year has highlighted the move from risk assets towards safe-haven assets, like the U.S. dollar, amid growing recessionary and geopolitical risks.
The recent move to regulate cryptocurrencies might certainly be playing into the drop as well, but bitcoin and other cryptocurrencies such as ethereum have been falling throughout the year, well before any regulation.
Investors will generally move into safe-haven assets if the outlook for the economy in the short to medium term is unfavorable.
Investors are concerned that the Fed’s response to high inflationary levels will tip the economy into a recession and put pressure on asset prices.
Central banks around the world are following the Fed and raising rates in their respective countries, including in Europe, where high gas prices and shortages are expected to be a catalyst for recession heading into the winter season.
Housing demand has fallen sharply in recent months, as higher interest rates hit consumers and price-out potential buyers.
Thus, reports have started to trickle in showing builders have been forced to lower prices even as cost iputs have risen and builder sentiment has been falling.
In August, housing starts rose unexpectedly, but housing permits fell by more than 10 percent.
Housing permits are seen as a leading indicator for housing activity, and the drop points to further slowing in the sector.
Housing was one of the biggest winners from the pandemic, as prices rose sharply in high demand and low interest rates.