Has the S&P’s Downgrade been the cause of the US Stock Market’s Crash?

Hardly so, it would seem.

Since the announced downgrade last Friday, coupon yields of US sovereign issues have been collapsing across the yield curve.

This has HARDLY been signs of an intuitive market response to a credit rating downgrade, where interest rates should be surging higher!

Instead, this looks likely a typical market reaction when the confronted with the prospects of recession.

What has been happening has been a rotation away from equities to bonds, since the debt downgrade crisis episode surfaced.

The currency market hardly exhibits the same downgrade reaction too. Instead of a selloff, we see the US dollar consolidating for the past two sessions. Over the span of two weeks, the US dollar has been inching higher.

Overall, the US dollar has not outperformed (as the previous bear market) or functioned as safehaven currency but has not collapsed either.

Yet gold prices continues to spike to record levels, which is now at 1,740s! (goldprice.org)

Of course gold prices has been suggestive of aggressive activism by central bankers to counteract this ongoing meltdown.

And with the appearance that ECB’s Bazooka (QE), estimated at $1.2 trillion, has fizzled out or has sputtered, more QEs could be in the pipeline.

Such market dissonance is telling.