Stock Meltdown Triggers 'Mad Rush' for Treasurys

Treasury 10-year yields dropped three basis points to 3.76%. The dollar fell as the prospect of Fed easing and diving Treasury yields dimmed the greenback’s appeal.

Cryptocurrencies reeled from a bout of risk aversion in global markets, at one point sending Bitcoin down more than 16% and saddling second-ranked Ether with the steepest fall since 2021.

The U.S. stock plunge is vindicating some of Wall Street’s most prominent bears, who are doubling down with warnings about risks from an economic slowdown.

JPMorgan Chase & Co.’s Mislav Matejka — whose team is among the last-standing high-profile pessimistic voices this year — said stocks are set to stay under pressure from weaker business activity, a drop in bond yields and a deteriorating earnings outlook. Morgan Stanley’s Michael Wilson warned of “unfavorable” risk-reward.

“This doesn’t look like a ‘recovery’ backdrop that was hoped for,” Matejka wrote. “We stay cautious on equities, expecting the phase of ‘bad is bad’ to arrive,” he added.

As the selloff in global stocks intensified Monday, JPMorgan Chase & Co.’s trading desk said the rotation out of the technology sector might be “mostly done” and the market is “getting close” to a tactical opportunity to buy the dip.

Buying of stocks by retail investors has slowed quickly, positioning by trend-following commodity trading advisers has fallen a lot across equity regions and hedge funds have been net sellers of US stocks, JPMorgan’s positioning intelligence team wrote in a Monday note to clients.

“Overall, we think we’re getting close to a tactical opportunity to buy-the-dip and our Tactical Positioning Monitor could dip further in the next few days,” wrote John Schlegel, JPMorgan’s head of positioning intelligence. “That said, whether we get a strong bounce or not could depend on future macro data.”

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