Recession Angst

Contrary to what we typically learn in business school, long-term interest rates in the US have significantly declined, yet global equity markets are experiencing a downturn. The US 10-year Treasury yields have fallen below 4%, with swap traders now fully anticipating three rate cuts this year. This shift is driven by growing investor concerns over a potential recession, a sentiment reinforced by weaker unemployment and manufacturing data.   These developments coincide with the Q2 earnings season, which has seen some disappointments in the tech sector, including Microsoft and Intel. However, we believe that the current 'recession angst' is overblown. In fact, falling yields and anticipated rate cuts by central banks should provide support to the market.