A major deleveraging event is intensifying as bonds are aggressively bought and equities are hammered.
The message from the market is that the Fed is behind the curve in an economy that's sputtering. Citigroup was just out with a call for two 50 bps cuts to start the cycle while the market is pricing in a 70% chance of 50 bps in September.
That said, this isn't an economic move in markets anymore. It's a deleveraging event in a market that's infatuated with leverage. It's clear there were large bond shorts layered into this market, perhaps as part of yen carry trades. That is blowing up now and it's also threatening to blow up leveraged equity longs.
The Nasdaq is now down 3% and the Russell 2000 is down nearly 4%.
Nasdaq comp