Commentary: The Only Thing We Have To Fear Is Fearful Investors

Don't put on those party hats yet. The U.S. financial markets are not as healthy as you might think from the rebound in equities. Outside the newly hopeful stock market, all seats on the flight to quality are still booked. Despite two confidence-building cuts in interest rates by the Federal Reserve, the yield spreads, or risk premiums, between safe and risky assets have actually gotten wider. And risky assets aren't the only ones investors have abandoned: They're even steering clear of safe but less liquid assets, like certain U.S. government bonds that are less traded--and thus harder to unload at a moment's notice. In other words, there's a flight to liquidity as well as a flight to quality.

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