Strategists do not foresee a recession despite a shocking August for markets. | Source: Spencer Platt/Getty Images/AFP
The Dow Jones dropped by more than one percent on September 3 following several weakened futures trading sessions, dropping 285 points as the U.S. and China imposed additional sanctions over the weekend, triggering conversations about a possible recession.
As investors continue to explore alternative stores of value and safe havens, strategists anticipate the bond yield in the U.S. to drop to sub-zero, following Japan and Germany.
Speaking to FT, Janus Henderson co-head of global bonds said:
“We could see zero. The probability is increasing, particularly as we drop so rapidly.”
Sub-zero 10-year Treasury yield would indicate increasing fear and uncertainty in both global markets and the U.S. equities market, which could result in a slump for the Dow and a possible recession if the Federal Reserve does not respond with additional rate cuts by the year’s end.
Dow losing momentum as global markets struggle, recession possible?
According to Chris Rupkey, MUFG Union Bank’s chief financial economist, the manufacturing sector has entered into a recession and the confidence of manufacturers has noticeably dropped as the trade dispute between the U.S. and China intensified in recent weeks.
“The manufacturing sector has broken and is now in a recession. The US trade war with the world has blown open a great big hole in manufacturers’ confidence, and it will be a miracle if the broader economy can continue to roll on with manufacturing in decline,” he said.
However, with many economists believing that much of the trade dispute is already priced into the market,