The markets are starting the week with a brutal hammering. Futures are deeply in the red, and bond prices have been crushed. The dollar is down across the board, and gold remains relatively flat—no safe haven in sight. Stocks are looking set to open more than 1% lower, and you know this is just the start of the chaos.
The situation isn’t exactly calming down. Case in point: Nvidia’s once-soaring stock price is now crumbling. At its peak in January, Nvidia had a market cap of $3.66 trillion. Fast forward to March 7, and it’s lost a staggering $1 trillion, dropping to $2.66 trillion. This is a wake-up call to anyone who thought the tech sector was invincible. Nvidia’s case shows that even the strongest players can feel the pain when the broader market shifts.
Trump, as usual, refuses to answer questions about a potential recession. He’s not worried. But we all know there’s only so long the economy can keep going at this pace. Eventually, things are going to break. Whether that’s in the form of a recession or hyperinflation, the writing is on the wall. From what it looks like, Trump’s trying to make sure the U.S. stays standing when the dust settles, but will he succeed? Probably not. We might be in for a painful period, and there’s a chance we revisit the lows from the COVID-era trendline support in 2025. Hard to imagine, but nothing seems impossible anymore.
Credit spreads are set to explode. We’re already seeing this two years earlier than expected. The key to the market’s future? Small-caps. They’ve been holding steady, but the real test is ahead. Default risk in junk bonds is real, and it’s about to get ugly.
Then there’s the issue of Japan, and this could be the catalyst that blows everything up. Japan’s 10-year government bond yield hit 1.6%, the highest since the Great Financial Crisis, and it’s expected to keep climbing. In just two years, yields have surged by 1.4 percentage points—massive movement in such a short period. Meanwhile, Japan’s 40-year bond yield has reached 2.85%, the highest level ever. This is a major red flag. Japan’s $10 trillion in government debt, with a debt-to-GDP ratio of 250%, is the largest in the world, and the skyrocketing cost of debt is sure to wake investors up to the reality of Japan’s financial position.
So here we are, stuck between a rock and a hard place. Will central banks print their way out of this next crisis? It’s the key question to keep an eye on. If they do, the consequences could be even worse than what we’ve seen in the past. Buckle up, because this ride is only just getting started.
Sources:
https://x.com/StockMKTNewz/status/1899072663600984468
https://x.com/MarioNawfal/status/1898891552363032993
https://x.com/_/status/1898887654399463667