What’s going on here?

Investors waved off the opportunity to “buy the dip” in US stock markets, expecting bigger discounts to greet them after Big Tech’s earnings season.

What does this mean?

America’s finest stocks are getting cheaper: the S&P 500 is down 16% from its February high, while an index tracking the Magnificent Seven tech stocks has fallen nearly 30%. Yet, investors aren’t enjoying the sales like you might expect. Instead of “buying the dip” and snagging a discount, they’re betting on the Magnificent Seven to drop even further. Here’s how you can tell: bullish investors typically buy call options – which profit when stocks rise – while bearish ones buy put options, which pay off if stocks fall. So when you look at the ratio of calls to puts on a stock, you get a snapshot of how optimistic (or pessimistic) investors are about it. For the Magnificent Seven, that ratio is near its lowest level since late 2023 – indicating that investors expect more suffering to come. Although, a true contrarian would argue that this is exactly when you want to lean in: the lower the bar, the easier it is for reality to beat expectations.

Why should I care?

For markets: It’s not just the Magnificent Seven…

The US is the opposite of a triple threat right now. The country’s stocks are on the slide, along with Treasury bonds and the dollar – and the latter two have been trusted as safe-haven investments for decades. That’s a rare sign that investors are stepping away from American assets altogether. Meanwhile, some of Europe’s offerings seem to be emerging as new safe havens. Just look at German government bonds: they’ve been rallying since March, with an influx of investors – attracted by stable policies and the possibility of rate cuts – sending yields to their lowest point since 2022 this week.

What’s going on here?

Gold prices have increased 31% this year to notch a record high, as investors hoarded the precious metal like doomsday preppers stockpile canned food.

What does this mean?

Gold’s well-known for its “safe-haven” status, attracting investment in turbulent times. And on Tuesday, the metal’s price rose above $3,500 for the first time, demonstrating investors’ unrest. People were already antsy about a possible recession, and now they have another reason to worry. The US president said he’s “studying” the possibility of ousting the Federal Reserve’s (Fed’s) chairman, after openly criticizing the central bank’s slow-and-steady approach to cutting interest rates. That’s serious: the Fed’s independence is a major reason why investors place so much faith – and money – in the US financial system. So if the president tries to remove the chairman before his term ends next May, that could give folk another reason to ditch American assets.

Why should I care?

Zooming out: “De-dollarization”, the hottest spring-summer trend.

Fewer investors are buying American debt via bonds, scared off by murky outlooks for the US economy and a teetering stack of government debt. And those staying the course are demanding higher compensation, sending US bond yields up. Meanwhile, central banks and institutional investors have backed out of a range of assets priced in US dollars. This “sell America” attitude has pushed the dollar to a three-year low against a basket of currencies. And if the greenback loses its own safe-haven status, the currency’s value could fall another 10% to 15% over the next few years.

The bigger picture: Let’s take a trip.

US investments have been the ones to beat for over a decade. Now, international rivals have a chance to steal a march – not least emerging markets, where interest rate cuts look more likely now that oil’s getting cheaper and the global economy is slowing. That explains why emerging market bonds are outperforming those linked to the dollar this year, even though they’ve historically handed out smaller returns.