The equity markets finally reacted to the risks of the spreading coronavirus that the bond markets have been pricing in for weeks. Treasury yields had already been dropping in the lead-up to this week's plunge and gold prices had been experiencing a strong rally. Stocks, on the other hand, weren't having any of it as they instead focused on the likelihood that the Fed would continue supporting equities allowing to keep going higher. That turned out to be a bad move for investors who were buying into that narrative.
Most everything except for Treasuries, gold and muni bonds have flipped over to red. Equities almost across the board, junk bonds, small-caps and even low volatility stocks look like areas to avoid until the VIX comes down from Friday's reading of above 40.
Treasuries appear to be the only real safe haven asset at the moment. Gold is off more than $100 an ounce from its recent high. The dollar has been declining again. Only Treasuries have been consistently up. That indicates to me investors aren't necessarily just pivoting to more defensive areas of the market. They're getting out altogether. The Fed will now likely be cutting rates multiple times before the end of the year and that's likely bullish for future gains in Treasuries. But when even gold investors are rushing for the exits, you know that they're simply abandoning any risky asset altogether.
Here is the full scorecard for the week ahead.