This is an classic example of irrational investors and how to take advantage of market timing to make easy money. Below, news of the US downgrade by S&P sends investors into a frenzy, they dump stocks (profitable) in favor of treasuries that were just downgraded by S&P. This is akin to me telling you that I own two stocks, stock A and Stock B, and the credit bureaus just said Stock A is not as stable or creditworthy as it used to be, so you go off and sell a bunch of Stock B and buy more of the unstable stock A. They sell, I’ll buy. Here’s the article:
NEW YORK (AP) — Government bond prices are rising as a stock market rout is sending traders into assets considered safe.
Investors are selling stocks Monday in response to a downgrade of U.S. long-term debt by the rating agency Standard & Poor’s. S&P took away the country’s AAA rating late Friday and downgraded it to AA+.
The flight from riskier assets like stocks is sending traders into Treasurys. They’re buying the same bonds S&P downgraded. The Treasury market remains one of the world’s deepest markets at $9.3 trillion. Treasurys are also considered the easiest security to buy and sell quickly.
In Monday afternoon trading, the price of the 10-year Treasury note is up $1.81 for every $100 invested. Its yield sank to 2.36 percent from 2.57 percent late Friday.