The markets are currently dealing with any number of cross-currents. One need only look to the fixed income markets to see how fears of stagflation are playing out in real time. Investors in search of a safe haven against stagflation are rapidly running out of options.

First, yields on the five-year TIPS are now below zero! In short, investors desperate for a “safe” way to play higher inflation have bid the bonds to levels not previously seen. (via Calculated Risk and naked capitalism)

Second, the slope of the Treasury yield curve continues to steepen. While long term interest rates have dropped, the shortest term rates have been in a virtual freefall. This is due in part by fears of incipient inflation. (via Crossing Wall Street)

Third, fears of an economic slowdown continue to affect the high yield credit markets. By one measure, high yield bond spreads have jumped to levels not seen since early 2003. (via Bespoke Investment Group)

In closing, John Authers at notes the contradiction of investors bidding up both bonds and commodities simultaneously.

Over the past 25 years, stagflation – inflation combined with a recession – has been avoided. Traders are buying commodities as a hedge against inflation and thus, implicitly, predicting stagflation.

Higher commodity prices guarantee upward pressure on inflation. But the slowdown predicted by stocks and bonds reduces commodity demand. So buying commodities to hedge against economic woes looks like a self-defeating strategy.

Safe havens against the perils of stagflation are few and far between. The obvious ones, like TIPS, have already been bid up to seemingly unsustainable levels. No one said this investing business was going to be easy.

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Please see disclosures here.

Please see the Terms & Conditions page for a full disclaimer.