It might be the market's most persistent mystery this year: If the economy is improving, and the Federal Reserve is pulling back on stimulus, then why are bond yields still so low?
For Lawrence McDonald of Newedge, the answer is simple: The first assumption, that economic growth is accelerating, is not really accurate.
Crude oil and gold have both sunk this year, and in July the S&P GSCI commodities index erased nearly all of its gains for the year. McDonald pointed out on Tuesday's "Futures Now" that you wouldn't normally see such bad commodity performance if the economy was really picking up.
Within the stock market, he notes that the retail sector is "massively underperforming" the S&P 500, which also seems to send a sour message about the economy.
But to this bond expert, the most troubling sign is that the 10-year yield has fallen relative to the 2-year yield. Known as a "flattening of the yield curve," this kind of relative performance tends to occur when bond investors don't think economic growth (and thus inflation) in the longer-term will outpace economic growth in the shorter-term.
In combination with his thesis that "the data is showing us something concerning in terms of the economy," McDonald determines that "all of those things together add up" to portray a dour portrait of economic growth.