The Weekend Edition is pulled from the daily Stansberry Digest.
Last month here in DailyWealth, I noted a stunning new record in the global debt markets...
In short, thanks to renewed "dovishness" from the world's central banks, the global value of negative-yielding debt soared to more than $13 trillion as of the end of June.
Now, just a few weeks later, even that record figure is beginning to look tame. The spread of negative interest rates has been accelerating. And as you can see in the following chart, it just surpassed $15 trillion this week...
The rapid spread of negative-yielding debt has coincided with a stunning rally in government bonds...
In fact, the charts of many bonds are starting to look more like high-flying growth stocks than anything you typically see in the credit markets. The following chart of U.S. Treasury bonds – represented by the iShares 20+ Year Treasury Bond Fund (TLT) – puts these moves into perspective...
Again, the charts of many government bonds around the world are showing similar, near-parabolic moves. But remember, bond prices and yields move in opposite directions. And as a result, yields are plunging back toward record lows...
Here in the U.S., the yield on the benchmark 10-year Treasury note has been fluctuating around 1.7% this week...
The yield even hit a new intraday low of 1.6% on Wednesday. That's less than 50 basis points above its multidecade low of 1.34%, set in the summer of 2016. And it was still trading above 2.5% as recently as May.
These aren't the only concerning signs in the Treasury bond market...
Regular readers know the Treasury yield curve has been one of the most reliable "early warning" signals for stocks and the economy for decades. The most commonly followed is the spread between 10-year and two-year Treasury yields.
In short, whenever the yield curve has "inverted" – whenever short-term interest rates have exceeded long-term rates – bear markets and recessions have inevitably followed anywhere from six to 24 months later.
As a result of these recent moves, nearly three-fourths of the yield curve is inverted today...
Even Steve Sjuggerud, who has been bullish since the market bottom in 2009, shared a worrying sign on Thursday. As he explained, based on today's yield curve, the Federal Reserve Bank of New York now says there's a 31.5% chance of a recession in the next 12 months.
Meanwhile, several important commodities are moving, too...
For example, copper plunged to touch a new two-year low this week...
If you've been with us for long, you know copper tends to be a reliable leading indicator of the global economy due to its use in a broad range of industries.
Crude oil is a critical economic commodity as well. And as you can see in the next chart, it appears to be rolling over again, too...
Last, but certainly not least, you may have noticed precious metals are surging...
Of course, we've been following the big breakout in gold for months now. But this move appears to be strengthening. As you can see in the long-term chart below, gold broke out this week to a fresh six-year high above $1,500 an ounce...
Better yet, it looks like silver is now joining the "party," too.
You see, if we've had one major criticism of the gold rally to date, it's that silver has been underperforming gold. That's unusual... During big precious metals bull markets, you typically see the opposite. Silver usually leads gold to the upside.
Again, that hasn't been the case in this recent rally so far. But that could now be changing...
Since the latest pullback ended in May, gold is up a little more than 18%. But silver is up just as much. And it just had its best day of the year on Wednesday... rallying nearly 5% to more than $17 an ounce.
Now, you're probably wondering what this all means...
Unfortunately, when we consider the evidence – a "panic" into the government bond market, spreading yield curve inversion, foreign currency and commodity weakness, and a relentless rally in gold – we can't help but reach an uncomfortable conclusion...
In short, it appears the market is now beginning to price in a global recession... a burgeoning debt crisis... or possibly both. In any case, a new bout of market trouble could be approaching.
Now, let us be clear...
Despite these concerns, we don't believe a crisis is imminent just yet.
The biggest reason has to do with the corporate debt markets. Specifically, the high-yield (or "junk") bond market is not yet signaling trouble.
While both junk bond yields and "spreads" have been moving higher, they remain historically low. They're still well below levels that have indicated serious problems in the past.
That could change... so we'll be keeping a close eye on the situation. But for now, history says we should give this long bull market the benefit of the doubt a little longer.
Of course, that doesn't mean we can't see further market weakness in the near term. We could easily experience another sharp correction like the one last fall, even if we ultimately avoid a recession a while longer.
Either way, we believe the case for holding plenty of cash and a healthy allocation to precious metals is stronger than ever. So if you've not yet taken this advice to heart, consider today's essay fair warning.
This brings me to one last thing...
Earlier this year, our founder Porter Stansberry announced that legendary gold analyst John Doody would soon be bringing his must-read gold research to Stansberry Research.
Well, we're pleased to announce that the big day is almost here... John's excellent Gold Stock Analyst service is officially relaunching this month. And we're holding a special online event on August 21 to celebrate.
Whether you're a novice investor looking for more guidance on gold and silver... or a longtime reader of John's work, like we are... you won't want to miss this event.
Click here for all the details... including how you could walk away with more than $20,000 worth of gold coins, just for watching this free event.
Regards,
Justin Brill
Editor's note: "The work John does is incredible," Steve says. "I don't think I've ever seen a track record quite like his." And you really want this gold-investing legend in your corner right now... because John believes the bullish trend in gold could help you make 10 times your money – or more – over the coming weeks. That's why he's joining us on August 21 to share the best way to profit from the boom.
Steve is so excited about this opportunity, he recorded a short video to share John's story... Click here to watch it now.
