This could manifest rising recession bets in the USA or a downgrading of long-term economic growth estimates. However, there is a positive side effect to falling yields. A peak followed a sustained yield rise over a couple of weeks in the S&P500. A sustained reversal to lower yields could also increase the equity market and restore demand for risky assets.
The dollar index is also retreating.
The Dollar Index fell sharply yesterday, hitting a sell-off during the New York session. Most of the time, DXY and stocks are moving in opposite directions. Their lockstep move rarely lasts long. Looking back at buying US bonds, it could be assumed that there is more chance of a further bounce in equities. However, there will be much more certainty for a fundamental reversal of the stock market to the upside if yields fall below 3%.
