According to Bloomberg, JPM Morgan Chase’s latest client survey shows the biggest net long position in US government debt in almost 15 years.
Is confidence driving exposure to US government debt to a 15 year high?
Or is it worry?
If rates are cut, yields across the maturity horizon from 1 to 30 years will go down, and prices will go up.
Confidence in lower interest rates could be driven by the perception of moderating US inflation, a trigger for Fed action. Recent inflation numbers have shown some moderation, and the US Fed is probably concerned about recent reports of low consumer confidence.
If rates are lowered, a bet on lower interest rates pay off before March, so investors may be positioning themselves now.
Markets anticipate more than react. It it is often better to travel than to arrive.
Now the other side.
Are investors flocking into treasury bonds because they are worried? Worried about the US stock market?
Possibly.
The market is up a lot, and a few stocks, like tech and AI have driven this move. In times of concentrated leadership, like now, it only takes one bad earning release to bring many stocks down.
Tariffs? Are they causing uncertainty, and is this uncertainty leading investors to worry?
No one knows “whether or not” tariffs are going to happen. And, if they happen, how much when, and on whom? Tariff uncertainty is even impacting the US Federal Reserve decision making. Chair Jerome Powel said that the range of possible tariff impacts is “very, very wide”.
Inflation may be moderating, but once again no one knows the impact of policies like deportations and tariffs.
And, regarding two key elements of everyday inflation, energy and food, there is limited evidence that these prices are going down from this level.
Gold, along with US Treasuries, is a safe-haven when investors are worried about the stock market, political or economic conditions.
Gold is at a 50 year high in price terms at 2,759 per ounce.
In the question of why more investors are increasing exposure to US government debt confidence or worry, worry wins.
For now.
If worry is winning, it may be best to stay in shorter-term bonds to preserve capital.
This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.
