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Collapsing factory orders manifest stagnation in economy fast deteriorating to recession – what are the effect on bonds and stocks?
Alan Hershey
Jul. 2, 2007
The factory orders number really shocked the financial world. This is another indication that the economy is stagnating and possibly headed right into deep recession. It is a concern now that business investment may not rebound as much as some forecasts. That is bearish for the stock.. However, is the bond market better off in the long run?
The bond market is concerned about inflation coupled with recession. The bonds yield for the longer side of the yield curve can rise sharply and then fall equally fast as recession changes to depression and inflation changes to deflation.
For now, the stocks and bonds both can rally while the real sell off can be in the dollar index because the market now expects a fast rate cut.
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