Some asset prices are moving together in unusual ways, an indication that investors may be preparing their portfolios for a coronavirus-led global slowdown.
That conventional wisdom has not applied this year. The S&P 500 is up 3.3per cent in 2020 and stands just off a record high despite Friday's drop, gold is up 8.3per cent and near its highest level in seven years while the U.S. Dollar Index is up 3per cent and hovering near a three-year high. Stocks, gold and the dollar have all notched yearly gains of 3per cent or more only twice in the past decade.
At the same time, investors are favoring U.S. stocks and bonds, as many expect the U.S. economy to be less vulnerable to a hit from the coronavirus than those in Asia and the eurozone. That has boosted the dollar while sending yields on some U.S. government bonds to record lows. Fed funds futures on Friday implied traders are pricing in a 59per cent chance of a rate cut at June's monetary policy meeting, compared with an implied probability of 17.5per cent at the start of the year.