The Blubber

Persistent concerns about a potential "Trumpcession" are driving stocks down, with investors increasingly turning to the bond market in anticipation that the Federal Reserve may be compelled to cut interest rates soon.

When investors buy bonds, their prices rise, causing yields to fall. On Monday afternoon, the yield on the two-year Treasury note — the U.S. government debt most sensitive to interest rate changes — dropped 10 basis points to 3.90% as investors sought "risk-free" assets. Meanwhile, the yield on the 10-year Treasury, a benchmark for mortgage rates and other types of loans across the economy, fell by about nine basis points to 4.23%.

The Trump administration's inconsistent approach to tariffs has hurt both consumer and business confidence. Although Trump previously used the stock market as a gauge of his success, he and his economic team remain firm, asserting that they are willing to endure short-term economic pain to restructure the American economy.

Matt Sheridan, lead portfolio manager for income strategies at AllianceBernstein, noted that while most of Wall Street is not yet predicting a recession with certainty, the stock market's recent volatility mirrors the turbulence that has impacted the bond market in recent years.

"People realize that uncertainty is here," Sheridan said. "And it's here to stay."

Bonds are often seen as a safe haven during market instability, and concerns about economic weakness have driven defensive investment into Treasuries, explained Jay Hatfield, CEO of Infrastructure Capital Advisors, which manages ETFs and several hedge funds.

"When the stock market's weak, it means the Fed's probably going to cut at some point," Hatfield said.

Even if the Federal Reserve delays easing its monetary policy, Hatfield added, investors will likely continue buying 10-year Treasuries, driving borrowing costs lower as economic concerns grow. According to CME FedWatch, markets are currently expecting three 25-basis-point rate cuts from the Fed by the end of the year.