r/stocks • u/2PhotoKaz • 2d ago

Broad market news Market getting smashed, where is cash going?

Clearly a massive sell off is happening, are traders (big and small) just sitting on cash once they sell? Gold, the bastion of safe heavens, is also getting hit.

Bonds? Simple interest? Are any sectors up in this mess?

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u/datasci1357 2d ago

It's not just the default risk though. Interest rates (especially at the longer end of the yield curve) are determined by inflationary expectations and supply/demand factors. As sovereigns issue more debt, someone needs to buy it. If that doesn't happen, then the cost to borrow (ie - interest rate) goes up, and your bond holdings take a haircut.
Who is going to buy US debt? There will be a rotation out of stocks & into US treasuries. But the US is rolling over a lot of debt in 2025, and foreign governments may be less inclined to buy. We'll see how it all unfolds, but to me, bonds are not the obvious choice given the unique nature of the present economic situation.

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u/Dr-McLuvin 2d ago

Ya a massive global equity sell off and recession is not gonna result in run away inflation. Bonds are a great place to be right now.

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u/HeadmasterPrimeMnstr 2d ago

Ya a massive global equity sell off and recession is not gonna result in run away inflation.

No, but a rapidly escalating global trade war will.

Powell and others are predicting a possible stagflationary economy.

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u/datasci1357 2d ago

Isn't a tarrif war inflationary?? No one knows for sure where inflation is headed, but personally I prefer gold over bonds atm

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u/Dr-McLuvin 2d ago

Tariffs are essentially creating artificial inflation for the goods that are tariffed. But that is just a one time price increase. The underlying inflation rate may not change.

After the tariffs, people have less buying power and buy less shit. People will lose their jobs. These are deflationary forces.

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u/mouthful_quest 2d ago

It’ll be the fed eventually, but get ready for hyperinflation