Comment by quitit

US Junk Bonds can be used as an early economic indicator. Potentially indicating downturns in GDP and increases in unemployment up to one year earlier than other indicators.

When Junk Bond yields are low, it suggests investor confidence is high (and a low risk of corporates defaulting). The article notes that yields are rising, this is understood to be a signal of economic uncertainty (i.e. greater chance of defaults/increased risk of investing.)

There are considerations to be made regarding about what caused the changes - in this case the presidents declaration of additional tariffs on China. Since this is an arbitrary decision, and not say the result of an economic trend, the certainty around the correlation is lower. Nevertheless the randomness of the actions are themselves a source of uncertainty, which too scares away investment.