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Yield Curves Invert in U.S., U.K

bloomberg.com

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Re: Yield Curves Invert in U.S., U.K

#101

Post by [deleted] »

gzu wrote: post #84
whatshisface wrote: post #52

Earlier quoted context omitted.

I'm not the OP, but if the Fed decides that the stock market isn't going to fall, then come hell or high inflation it's not going to fall. Some people think that the recent history of interventionist monetary policy (QE) points to a Fed that is willing to pump up asset prices in the event of trouble. Does that mean the economy won't fall apart? No, but it does mean that holding cash could be a worse idea than holding…

There’s now also moral hazard too with the rise of indexing and retirement. They need to keep the WHOLE stock market up. Many fewer investors now do any research and chose companies based on fundamentals. The companies that exist today must exist forever into in roughly the same proportions to keep SP 500 index from falling too heavily. Companies exploit this relationship now by destroying their balance sheets and us…

[deleted]

Re: Yield Curves Invert in U.S., U.K

#103

Post by SketchySeaBeast »

frankbreetz wrote: post #20
gigatexal wrote: post #3

One of the surest signs to a recession one can find.

"As recession signals go, this so-called inversion in the yield curve has a solid track record as a predictor of recessions. But it can take as long as two years for a recession to follow a yield curve inversion." https://www.reuters.com/article/us-usa-economy-watchlist-gra...

Just in time for someone else to come into power and have to deal with the mess.

Re: Yield Curves Invert in U.S., U.K

#104

Post by tabtab »

cletus wrote: post #82
apo wrote: post #33

Key recession indicator is flashing red. Unlike the stock market, which is both backward- and forward-looking, the bond market is myopically forward-looking. When the yield between the 10-year and 2-year US treasury inverts, a recession is months away. This chart, showing the difference between the yield (or spread), shows recessions in grey: https://journal.firsttuesday.us/using-the-yield-spread-to-fo... Notice how…

I'd just like to point out that the yield curve inverted in 2018 [1] yet here we are. > Prepare for the inevitable recession. It's not different this time. This point is tautological. Of course there will eventually be a recession. No one can say when. There are different factors in every cycle. The QE period is essentially unprecedented. The rise of tech stocks in the last 20 years is a once-in-a-century type struct…

Re: the yield curve inverted in 2018 yet here we are.

There are somewhat different ways to measure it, and by some metrics, it merely "touched" the zero line instead of went below. Bloomberg may have been using a dramatic flair.

Also, when it does drop below zero, the actual recession was roughly 12 to 18 months later. Thus, that occurrence, even if interpreted as an inversion, is not (yet) inconsistent with past patterns.

Re: Yield Curves Invert in U.S., U.K

#105

Post by snarf21 »

apo wrote: post #33

Key recession indicator is flashing red. Unlike the stock market, which is both backward- and forward-looking, the bond market is myopically forward-looking. When the yield between the 10-year and 2-year US treasury inverts, a recession is months away. This chart, showing the difference between the yield (or spread), shows recessions in grey: https://journal.firsttuesday.us/using-the-yield-spread-to-fo... Notice how…

I think you are right but it won't really hit until 2020 when the administration changes. One thing really helping drive this market is that indexes are driven by a few huge mammoth companies. Additionally, the tax law changes let them bring home tens of billions that they spent on buybacks to drive the price even higher. That was a one time event. Interest rates are already too low and the Fed still has too much paper. There isn't nearly as much powder in the gun this time around. I think this time will be worse than 2008 but time will tell.

Re: Yield Curves Invert in U.S., U.K

#106

Post by adventured »

apo wrote: post #33

Key recession indicator is flashing red. Unlike the stock market, which is both backward- and forward-looking, the bond market is myopically forward-looking. When the yield between the 10-year and 2-year US treasury inverts, a recession is months away. This chart, showing the difference between the yield (or spread), shows recessions in grey: https://journal.firsttuesday.us/using-the-yield-spread-to-fo... Notice how…

> When the yield between the 10-year and 2-year US treasury inverts, a recession is months away.

If by "months" you mean nearly two years.

"The last inversion of this part of the yield curve was in December 2005, two years before a recession brought on by the financial crisis hit."

"A recession occurs, on average, 22 months following such an inversion, according to Credit Suisse."

https://www.cnbc.com/2019/08/13/us-bonds-yield-curve-at-flat...

Re: Yield Curves Invert in U.S., U.K

#107

Post by Bombthecat »

clomond wrote: post #93
apo wrote: post #33

Key recession indicator is flashing red. Unlike the stock market, which is both backward- and forward-looking, the bond market is myopically forward-looking. When the yield between the 10-year and 2-year US treasury inverts, a recession is months away. This chart, showing the difference between the yield (or spread), shows recessions in grey: https://journal.firsttuesday.us/using-the-yield-spread-to-fo... Notice how…

"Past Performance Is Not Indicative Of Future Results". I am not saying a recession ISN'T imminent - but to declare affirmatively due to a technical indicator that one IS in an environment which has differences from the past is equally egregious. This yield inversion is based on sentiment, not fundamentals (yet). Also, suggesting folks buy long-term treasuries is literally following what the market is doing right now…

Yeah, my gut is also telling me, that governments would let half the population starve then let a recession happen.. But if it hits. It will be huge... We might also hit incredible high inflation... Making cash worthless..

Re: Yield Curves Invert in U.S., U.K

#108

Post by buboard »

soVeryTired wrote: post #40
buboard wrote: post #36

Still baffled that this is called a curve

Any continuous locus of points is a curve - that's what makes the Jordan Curve Theorem hard to prove :) On a more serious note, the graph displayed in the article is a timeseries of the difference between two points on the curve. The actual curve looks something like this: https://en.wikipedia.org/wiki/Yield_curve#/media/File:Yield_...

isn't that discontinuous?

Re: Yield Curves Invert in U.S., U.K

#109

Post by throwaway5752 »

Everyone serious knew that a trade war would set a recession in motion, and that it would be a trade war the US would lose because of the directionality of the trade. The thought has always been that the president was using a high leverage negotiating strategy (see https://www.newyorker.com/news/news-desk/for-trump-diplomacy..., for example) to extract maximal concessions from PRC. But in the end, most of the people involving in mid and long range investment decisions thought that they could model him as a rational actor. What we are seeing is the investment community's realization this might not be true. You can look for many recent examples of shifts in investment activity (https://www.autoblog.com/2019/08/13/ford-gm-preparing-for-ec...).

Re: Yield Curves Invert in U.S., U.K

#110

Post by 3JPLW »

xivzgrev wrote: post #81
dkrich wrote: post #58

I'm surprised that everyone blindly cites the inverted yield curve as a recession indicator without considering the "why". Seriously, if you were to ask ten people why an inverted curve predicts recession, you'd get ten completely different answers. I personally don't think this is necessarily the inversion that is going to be predictive of a recession because the inversion is occurring at the long end (the 10/30 yea…

I agree. For the two recessions I’ve lived through, we didn’t arrive at them with everyone well aware it was going to happen. They snuck up and took the country by surprise. The tech bubble burst, and the real estate subprime bubble burst. We may go into a slump because everyone is expecting a splump to happen because it’s been 10 or so years of a bull run. But I don’t see a full-on recession without a large bubble b…

This is what I've been seeing, too. If everyone is expecting a recession, then the recession gets "priced into" the current valuations. The big trouble comes if the expectations/pricings are off in some sector.
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