Conclusion
Gold (orange below) has outperformed the S&P 500 (blue) over the past three months. Long-term Treasuries (green), after leading both stocks and gold for the first six weeks, have plunged since the Fed announced a 50 basis point rate cut on September 18.
Tight credit spreads, abundant liquidity, and solid growth are not usually a good time for the Fed to aggressively cut rates. The bond market reaction warns that financial markets are still wary of inflation and concerned that Jay Powell may have emulated Arthur Burns and cut too early.
