Major stock market indexes are struggling for direction and typical haven investments are on the rise, suggesting investors are giving the market-driving optimism that greeted 2017 a long, hard look.
The S&P 500 has been zigzagging for the past six weeks, despite Monday's strong rally, while U.S. Treasury yields are well off their recent highs and gold is among the world's hottest commodities – all of which points to an uptick in anxiety.
It has many sources.
The early promise of a bromance between U.S. President Donald Trump and Russian President Vladimir Putin appears to be over, ending speculation that the two countries might co-operate to make the world a safer place.
Syria's recent chemical attack against its own citizens has drawn a U.S. military response, threatening to drag the United States into another overseas conflict.
Tensions between the United States and North Korea are growing worse, as the regime of Kim Jong-un pursues nuclear arms and the United States says it could take pre-emptive action against the authoritarian state.
In France, the popularity of Marine Le Pen in upcoming presidential elections raises the possibility that another pillar of the European Union could crumble.
Even the U.S. economy is raising some concerns. In March, employment growth was disappointingly weak, while retail sales fell for the second consecutive month.
A consensus of economic forecasters now believes the U.S. economy grew by less than 1.5 per cent in the first quarter, down from an earlier forecast of about 2.2-per-cent growth.
The Federal Reserve Bank of Atlanta is particularly gloomy. It reduced its forecast for U.S. economic growth to just 0.5 per cent in the first quarter.
Against this barrage of revisions and geopolitical concerns, stocks have been drifting below their record highs for more than six weeks.
Despite Monday's gains, the S&P 500 is down 2 per cent from its record high on March 1 and Canada's S&P/TSX composite index is 1.6 per cent below its high in February.
To be sure, optimists still have something to chew on. On Monday, China reported that its economy expanded by 6.9 per cent in the first quarter, marking its fastest pace of growth in six quarters and providing an upbeat signal for the global economy.
U.S. corporate profits are also providing support. During the early days of the first-quarter reporting season, companies in the S&P 500 have reported a 9.7-per-cent gain in their quarterly profits, beating expectations, according to Bloomberg.
But stock valuations, by some measures, are at their highest level in more than a decade, leaving little room for disappointment at a time when the bull market recently marked its eighth anniversary.
"Valuations alone rarely put an end to a cycle, but they do help give an idea of its age," Robert Kavcic, an economist at BMO Nesbitt Burns, said in a note.
Bond yields are slumping
The yield on the 10-year U.S. Treasury bond surged after Mr. Trump won the U.S. presidential election in November, rising above 2.6 per cent in March from below 1.8 per cent in November. The sharp rise coincided with a far more bullish outlook for economic growth and inflation. But the yield has since retreated below 2.3 per cent, or roughly where it was in mid-November.
Gold is shining
Gold can become a popular holding when global tensions are rising and investors are looking for a safe place to park their cash. Its price has risen to about $1,285 (U.S.) an ounce, up 14 per cent since mid-December, touching its highest level since early November.
The S&P 500 is drifting
The U.S. benchmark index rose nearly 15 per cent between November and March, in a rally known as the Trump bump. But the index appears to be taking a breather now: It has moved more-or-less sideways for six weeks, raising the question of whether investors are waiting for the economy to catch up to stock prices.
The VIX is stirring
The CBOE Volatility index, or VIX, rises when investors' nerves are rattled. It has risen as much as 29 per cent since the start of April. Though still at a relatively low level, the VIX's sudden rise may be signalling that investors are jumpy.
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