US growth fears spiral as the tech wreck gains momentum

US markets

Stocks got wrecked, bonds surged, and risk appetite took a serious hit as another ugly read on the U.S. consumer fuelled fresh concerns about the health of the world’s largest economy. What was supposed to be a soft-landing narrative is quickly turning into a hard dose of reality.

The U.S. economic backdrop is shifting sharply lower, a stark contrast to the euphoria that defined the start of ‘25. And now, investors are scrambling to adjust their positioning on the fly.

The sell-off had that eerily familiar ‘sell everything’ feel, with the mega-cap titans sliding deeper into correction territory. The Magnificent Seven—once untouchable—are facing their toughest test in years.

For now, the market is in full risk-off mode, bonds are catching a bid, and traders are rotating into defensive plays. The question now: was this a shakeout or the start of something deeper? If economic data keeps missing, the market may be forced to rethink everything.

The heaviest selling hit the speculative pockets of the market, with crypto, gold, and oil all taking a beating as risk appetite crumbled. Meanwhile, the yen caught a solid bid—clear evidence that safe-haven flows are ramping up.

And just like that, we’re back to a cash-first mindset. In times of uncertainty, cash isn’t just a defensive move—it’s the ultimate financial weapon. When the market starts buckling under pressure, liquidity becomes the most valuable asset on the board.

With risk-off momentum building, traders are tightening exposure, rotating into bonds, and stacking dry powder. Until the market finds a clear direction, capital preservation is the name of the game.

The Nasdaq is sinking fast, down more than 1% as the "Magnificent Seven"—the undisputed market titans of the last two years—take another bruising. The selling pressure is relentless, with the Mag 7 now down 13% from their December peak, officially in correction territory.

But here’s the thing—this isn’t their first rodeo. Last summer, these same stocks were in a full-blown bear market, plunging over 20% in barely a month, only to roar back with a vengeance. Their ability to defy gravity has been nothing short of legendary.

So, the question now is: can they do it again?

The answer may lie in one stock—Nvidia.

With earnings set to drop after the close on Wednesday, this is the make-or-break moment for AI euphoria. If Nvidia delivers, the market might just find a foothold. But if they disappoint? Brace for impact.

This isn't just about one company—it’s about sentiment, momentum, and whether the Mag 7 still have enough firepower to pull the broader market out of its slump. For now, all eyes are on Nvidia’s report card—and whether it can reignite the AI trade or send stocks tumbling further into the abyss.

Asia markets

Oh boy—as Asia kicks off, are we finally in that Will E. Coyote moment I warned about last week? Bond yields are in freefall, U.S. growth fears are spiraling, and the tech wreck is still gaining steam. The market doesn’t have its Acme parachute ready, and the edge of the cliff is looking mighty close.

The perfect storm is brewing. A string of data misses, escalating trade tensions, and violent asset price swings has traders questioning just how solid the U.S. economic foundation really is. Enter Treasury Secretary Scott Bessent—one of the sharpest portfolio managers out there—who just waved the red flag, warning that the economy is far more “brittle” than headline numbers suggest. Yikes.

If he’s right, Asian and EM markets are about to get thrown into the spin cycle. When the U.S. sneezes, global markets don’t just catch a cold—they get the full-blown bear flu. The early signs? MSCI’s Asia ex-Japan and EM indexes, along with Chinese and Japanese benchmarks, all dropped over 1% on Tuesday. That’s a broad-based risk-off flush.

Meanwhile, over in the rates market, the two-year Treasury yield just cratered to its lowest level since before the U.S. election, while the 10-year yield nosedived nearly 10 basis points. The Fed funds market is now screaming for at least two more rate cuts this year, with liftoff expected in July.

Normally, a falling dollar and lower yields would be a launchpad for EM assets, but not when the move is fuelled by stagflation fears. The real story? Big money is slashing risk, rotating into cash and U.S. bonds, while the yen is catching a massive bid—its safe-haven instincts finally kicking into high gear.

This brings us to USDJPY, which is shaping up to be an all-out battleground at 149. Bulls and bears are squaring off in a high-stakes fight for control, and the next big move could set the tone for weeks. Momentum is shifting fast, and if the risk-off wave keeps building, we might not see the bottom until the dust settles.

If this really is the Coyote moment, markets won’t just hover in mid-air—they’ll be in freefall before they realize what’s hit them.

Forex markets

The sharp drop in U.S. bond yields is turning up the heat on the dollar, as investors ramp up bets that slowing economic growth will force the Fed’s hand on rate cuts—inflation be damned.

The 10-year Treasury yield plunged to 4.28% on Tuesday, its lowest level since mid-December, down from above 4.8% just a month ago. The catalyst? A string of weak data signaling that U.S. consumer and business sentiment is faltering. What started as a soft landing narrative is quickly morphing into a hard slowdown reality.

That shift has taken a bite out of the dollar, down 2% YTD against a basket of peers, confounding earlier expectations that Donald Trump’s return to the White House would keep the greenback well-bid. Traders initially piled into dollars on the premise that Trump’s tariffs and immigration curbs would stoke inflation and force the Fed to stay hawkish. But as growth concerns take center stage, that bullish thesis is starting to unravel.

The real puzzle now? How the U.S. slowdown bleeds into the global economy and how traders position for the next move. The dollar has a complicated love-hate relationship with risk sentiment—it thrives in times of uncertainty, but also struggles when investors start pricing in aggressive rate cuts.

The key to watch: Does this bond rally stem from safe-haven demand or just a dovish repricing of Fed expectations? If it’s the former, the dollar could actually find footing—even with a flat yield curve—as investors flee to U.S. assets for stability. But if it’s the latter, and markets keep leaning into the Fed pivot trade, the dollar could remain under pressure.

For now, it’s all about following the bouncing ball. The U.S. economy might be slowing, but whether that translates into a weaker dollar isn’t as straightforward as it seems.