In which order do the financial instruments typically lead the downturn at the end of an economic expansion?

During the end of an economic expansion, financial instruments tend to respond in a predictable order based on the economic cycle and investor sentiment. Typically, bonds lead the downturn followed by stocks, and then commodities.

When economic growth begins to slow, interest rates may start to decline, which usually causes bond prices to rise. Investors seeking safety often move into bonds first as they predict declining economic stability and may be less inclined to hold riskier assets. After the bond market reacts, equities follow, as stock prices often begin to fall in response to diminishing corporate earnings outlooks and reduced consumer spending. Eventually, commodities reflect this downturn as demand decreases due to a slowdown in economic activity. Commodities are typically seen as a lagging indicator in this scenario because their prices respond to shifts in supply and demand after the bond and equity markets have already reacted.

Overall, understanding the typical sequence helps in anticipating market movements and making informed investment decisions.