The past week offered a sobering reminder: markets still hold veto power.
Soaring bond yields on Tuesday night triggered a rare wave of concern—even among those previously dismissive of a financial crisis scenario. The sudden spike in long-term yields appeared to spook the White House into delaying its tariff policy by 90 days.
According to The New York Times, insiders revealed that the sharp rise in Treasury yields and broader market chaos pushed President Trump to announce a temporary suspension of retaliatory tariffs on most nations.
“Economic turmoil, especially the surge in Treasury yields, caused the President to backtrack on Wednesday afternoon,” said four people with direct knowledge of the decision.
What likely drove the bond sell-off? Leverage unwinding, liquidity runs, and perhaps even foreign governments hitting the sell button. Regardless of the cause, the combination of equity losses, rising yields, slowing growth, and inflation fears forced the administration’s hand.
The equity market has responded with violent swings:
S&P 500 returns over the past six sessions include: -4.8%, -6.0%, +9.5%, -3.5%.
Wednesday marked one of the top 10 best days for the S&P 500 since 1928, but the optimism didn’t last.
This is not normal volatility. This is structural tension.
Bond Market Strikes First
The yield surge was not just a market move—it was a message. The fixed income market essentially checked the White House, forcing a rare policy reversal.
And yet, the core risk hasn’t dissipated. Stocks remain fragile. Bond yields are still climbing. The U.S. dollar continues to weaken. The tariff regime, even with the delay, remains historically aggressive.
The Wall Street Journal reported:
“Trump told advisors he was willing to accept ‘pain.’ He acknowledged tariffs could cause a recession but said he wanted to avoid one if possible.”
That’s a chilling calculus: accept short-term economic damage for perceived long-term leverage. It also raises the odds of a policy-induced downturn.
Bear Market… Or Close Enough?
Technically, the S&P 500 has not entered a bear market, falling 18.9% from peak—shy of the 20% threshold. But the market has seen similar near-bear drawdowns before:
1976–1978: -19.4%
1990: -19.9%
1998: -19.3%
2011: -19.4%
2018: -19.8%
In reality, the 1% difference is only relevant to historians, not investors.
Markets price in future risk. In 2020, stocks rallied while millions lost jobs. The market looked ahead—and was right. This time could be no different: the market may fall before the recession hits, and rebound while the economy is still contracting.
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