Stocks sink as virus worries fuel flight to safety

Stocks sink as virus worries fuel flight to safety
In a reversal of the reopening trade that has powered this year's equity rally, cyclical companies bore the brunt of Monday's sell-off.
JUL 19, 2021

Stocks slumped around the world as investors rushed into haven assets after the delta coronavirus variant cast a pall over the economic recovery, while tension between the U.S. and China escalated.

In a reversal of the reopening trade that has powered this year’s equity rally, cyclical companies bore the brunt of Monday’s rout. Commodity, financial and industrial shares led losses in the S&P 500, which fell the most since May.

Airlines and cruise operators tumbled amid concern over further travel restrictions. After recently plunging to pre-pandemic levels, the Cboe Volatility Index, or VIX, soared. European stocks had their biggest drop of 2021, following a sell-off in Asia.

With the risk-off sentiment spreading across global markets, Treasury 10-year yields spiraled to their lowest since February, while the dollar rose alongside the yen and the Swiss franc.

Despite the classic safety trade, gold retreated. Oil sank after OPEC+ agreed to boost supply into 2022. Meantime, Bitcoin’s slide pushed the world’s largest digital currency closer to $30,000.

The resurgence of Covid-19 is unsettling global investors, who are considering whether new lockdown restrictions will sap the economic rebound and reverse an equity rally that had driven stocks to a record.

For Matt Miskin, co-chief investment strategist at John Hancock Investment Management, the move to “higher-quality assets” such as Treasuries is justified. In a Bloomberg Television interview, Miskin said that “we’re in a decelerating growth environment.”

“Risk aversion is firmly in place as the Delta Covid variant spread is triggering a flight to safety,” wrote Edward Moya, senior market analyst at Oanda. “Equities were ripe for a pullback given Wall Street was in agreement that this is ‘as good as it gets’ for peak earnings, economic growth, monetary stimulus. It is hard to hold risky assets over the short term now.”

Geopolitical jitters also resurfaced on Monday after the U.S., the U.K. and their allies said the Chinese government has been the mastermind behind a series of malicious ransomware, data theft and cyber-espionage attacks against public and private entities, including the sprawling Microsoft Exchange hack earlier this year.

Latest News

Osaic executives Kristy Britt and Greg Cornick to leave
Osaic executives Kristy Britt and Greg Cornick to leave

The firm's CFO and EVP of Wealth Management Solutions are the latest executives to exit the broker-dealer.

Estate planning becomes a client retention issue for financial advisors, survey finds
Estate planning becomes a client retention issue for financial advisors, survey finds

Clients are saying they would consider switching advisors if another professional offered estate planning services, according to a new Trust & Will survey.

Candidly adds AI agents for Trump Accounts, workplace benefits
Candidly adds AI agents for Trump Accounts, workplace benefits

CEO Laurel Taylor says the fintech's composable AI stack helps workers optimize dollars across Trump Accounts, 529s, 401(k)s, and other employee benefits.

BMO adds three advisors in Dallas amid Y'all Street wealth boom
BMO adds three advisors in Dallas amid Y'all Street wealth boom

The bank has swiped three private banking veterans from BNY as the city climbs the ranks of America's fastest-growing wealth hubs.

UBS moves toward full-service US bank as plans to extend wealth business
UBS moves toward full-service US bank as plans to extend wealth business

Employee accounts, crypto trials and job cuts frame a pivotal year for the Swiss lender.

SPONSORED Who builds the income when the pension disappears?

Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income

SPONSORED Why direct indexing stopped being optional

Direct indexing is on pace to outgrow ETFs and mutual funds. Northern Trust's Ken Lassner explains why the advisors who get it wish they had started sooner.