Markets & Economy

Financial markets have staggered to a standstill

Did the market-lurching signify changes in economic trend, or correction of prior events?

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After three weeks of startling (and painful) movement, financial markets have staggered to a standstill. The question before the house: Did the market-lurching signify changes in economic trend, or correction of prior events? Stick with correction. Here is the reconstruction. Once upon a time -- 18 months ago -- U.S. long-term rates were rising fast based on Fed withdrawal from quantitative easing (QE) and another apparent U.S. economic acceleration. The U.S. 10-year Treasury reached 3 percent twice, mortgages close to 5 percent at New Year's 2014. Then, in one of the more remarkable patterns of recent times, the 10-year entered a straight-line glide path for 16 months, culminating at 1.9 percent in the third week of April. The lurch upward since, into the 2.20s, has disturbed a lot of people but should not. The 16-month slide was the work of the U.S. economy doing far better than Europe, hence the Fed shouting intentions to raise its rate while the European Central Ba...