Market volatility has the world asking bigger questions

If you’ve been trying to make sense of this year’s historic market whiplash, you’re not alone. No one really knows what’s going on, and the most unnerving part is that the old playbook isn’t working at the moment. 

Conventional wisdom and historical patterns indicate that rising market volatility would usually trigger a “flight to safety” into Treasury bonds and the U.S. dollar in uncertain times like these. But this time, both have flinched. Treasury yields jumped about 50 basis points (0.50%) last week across varying maturity dates. (When investors sell off bonds, their prices fall — and since yields move inversely to prices, those yields rise.) This recent selloff was driven by growing concerns about the U.S. government's fiscal outlook and mounting debt, making investors more hesitant to hold long-term Treasurys. Meanwhile, the dollar index is also down around 9% since mid-January. While it’s not entirely uncommon to see a diversion like this, it suggests that investors’ compasses are struggling to find north, and that their usual instincts are being overridden.

Part of that “something” is the chaotic sequence of events over the past two weeks: a surprise $6 trillion market selloff; new, steep tariffs followed by a sudden 90-day pause; and now selective tariff exemptions for Chinese-made tech. (Over the weekend, a surprise announcement from the administration said that products like smartphones, laptops, and semiconductors would be spared from the new 125% levies on goods from China. On Sunday, Commerce Secretary Howard Lutnick said that reprieve would be temporary.) 

The damage is already in motion. Recession fears are accelerating. In January, economists surveyed by The Wall Street Journal gave a 22% chance of recession this year. That number has now doubled to 45%, with some estimating that tariffs alone could shave more than a full percentage point off 2025 GDP growth. Even Goldman Sachs briefly bumped its recession odds up to 65% before pulling back after the pause announcement. The confusion is real — and contagious.

Ultimately, it’s just another addition to the growing list of variables that explain the unusual market behavior of the past week. Equities and bonds are both down. The dollar is weaker. Consumer sentiment just logged one of its worst readings in a decade. And the tried-and-true 60/40 portfolio strategy — the bedrock of modern financial planning — is starting to feel a bit shaky when both sides of the equation are sliding at the same time.

If you’re feeling exhausted trying to keep up — or just plain confused — you’re not alone: One senator called the quickly changing, sometimes conflicting policy announcements “playing ‘red light, green light’ with tariffs.” Now, the real concern for investors is mainly long-term credibility and stability. Global investors are starting to question the structural reliability of U.S. policy. Ballooning deficits, erratic leadership, and a "just kidding" approach to tariffs aren’t helping. A growing chorus of analysts is wondering out loud: Is the U.S. still the world’s default financial anchor?

It’s far too early to call this a full-blown reshuffling of the global financial order — but it’s not too early to say that the ground beneath our feet is pretty unstable right now. Whether this is a temporary wobble or the early tremor indicating a bigger reset, one thing’s clear: The assumptions investors used to rely on are being tested in real time.

This content originally appeared in The Gist, Origin's twice-weekly personal finance newsletter.

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