Prominent financial analyst Gordon Johnson has ignited discussion on social media, suggesting that a potential “Liberation Day 2.0” – an event triggering a significant equity market downturn – could be imminent.
What Happened: The CEO and Founder at GLJ Research, LLC, Johnson’s comments come as the yield on the 30-year U.S. Treasury note edges closer to the critical 5% mark, coinciding with a weakening U.S. dollar.
In a series of posts on X, Johnson engaged with another financial commentator, Capital Flows, regarding the interpretation of rising interest rates. While acknowledging the argument that higher 30-year yields could signal increased U.S. growth and inflation, Johnson questioned the concurrent decline of the Dollar Index.
“If rates are rising, while the DXY is falling, is that not indicative of stagflation, and money leaving the US?” Johnson queried. He also challenged the comparison of rising German 30-year yields, attributing it to a “repricing of risk” following the new government, given Germany’s relatively low debt-to-GDP ratio.
Johnson then drew parallels to a past market event. He pointed to the confluence of factors, including the previous administration’s trade policies with China and the current Republican party’s proposed budget, which he says would lead to a “$4tn increase in deficit.”
According to Johnson, these factors have contributed to the surge in yields to levels that previously prompted former Treasury official Scott Bessent to implement “Liberation Day 1.0,” an action that significantly spooked the stock market.
His concern centers on the idea that the bond market previously demonstrated its power to pressure the prior administration when 30-year yields approached 5%. And that is when the Donald Trump-led administration announced a 90-day pause in reciprocal tariffs.
With yields nearing that threshold again, Johnson questioned whether current Treasury officials can allow equity markets to continue their upward trajectory, pushing Treasury yields higher and potentially jeopardizing the refinancing of the over $8 trillion in US debt due in 2025.
Why It Matters: As of the publication of this piece, the 30-year Treasury yielded 4.91%, while the 10-year yields were at 4.46% and the 2-year Treasuries yielded 3.99%.
After Tuesday, the S&P 500 index turned positive for the year, up 0.31% year-to-date. Meanwhile, Dow Jones was still down -0.59% YTD, and Nasdaq 100 was up 1.06%.
The Dollar Index spot was 0.07% lower at the 100.9300 level. Whereas, the SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, ended on a positive note on Tuesday. The SPY was up 0.66% to $586.84, while the QQQ advanced 1.52% to $515.59, according to Benzinga Pro data.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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