That giant hissing sound you hear is indeed a financial market bubble deflating. For months, countless headlines in the financial press have detailed the impending stock market decline. Headlines like "Dow 19,000 is no cause for celebration" and "Stocks at all-time highs calls for extreme caution" are commonplace. It is only a matter of time, it seems, before the inevitable correction or crash in the stock market occurs.
The smart money was certainly on a sharp decline in the stock market upon the unlikely election of Donald Trump as president. But that stock market correction lasted only a couple of hours. Stock futures plunged on election night when it became clear Trump was going to win, only to sharply reverse course when the President-elect struck an unexpected conciliatory chord in the wee hours of the next morning.
The current bursting of the financial bubble is not playing out in the stock market, but in the usually more staid bond market. Many market participants have not noticed this upheaval, because focusing on the stock market is apparently much more interesting, and because many investors wrongly believe that stocks are risky and bonds are safe.
What many don't understand is that the government bond market is largely about mathematics. Simply put, when interest rates in the market rise, prices of existing bonds fall. Interest rates are rising as a result of many factors including promised increases in infrastructure spending by the Trump administration and the likelihood the Federal Reserve will increase its benchmark federal funds rate next month.