After many of the less watched yield curves inverted in the last few weeks, the most famous one, the 2 year vs 10 year, touched zero in the last few hours.
Historically a recession follows this signal within 12-24 months. Here’s some exact details from the excellent Baerlocher Bearing, although there are even more instances of recssion following inversion than listed here:
The lag time between a negative curve and a peak in the S&P500 is less.
We have seen a nice bounce in the markets since the Fed meeting as expected, but I cannot be long term bullish while both the yield curve and other liquidity measures are cooling off. However, in the short term, there are several reasons to be confident stocks will do well. Seasonally April is the best month for the S&P 500:
The Russia/Ukraine war could drag on but I don’t think a peace deal is priced in to occur soon, while major escalation by Russia is unlikely, leaving more opportunity for positive news for stocks. Economic confidence should also increase as Covid fades further into the background.
I took profits last week on BTG, CCJ, and the more lackluster (for me) GDXJ but remain invested in my larger commodities positions, where I expect strong performance over the coming decade. I may re-enter those positions at a later date. Recently, I’ve tended towards a conservative portfolio of approximately one third each in stocks, cash, and commodities (Silver, Oil, Gold, etc) and don’t expect to deviate much from that until we see some further developments on both the war and money printing fronts.
For the shorter term, I’m looking for a pullback opportunity to invest more in stocks. They are too extended right now. I might explore some option plays but am not eager to buy straight calls or puts in this environment.
Yield Curve Inversion Is Here
Yield Curve Inversion Is Here
Yield Curve Inversion Is Here
After many of the less watched yield curves inverted in the last few weeks, the most famous one, the 2 year vs 10 year, touched zero in the last few hours.
Historically a recession follows this signal within 12-24 months. Here’s some exact details from the excellent Baerlocher Bearing, although there are even more instances of recssion following inversion than listed here:
We have seen a nice bounce in the markets since the Fed meeting as expected, but I cannot be long term bullish while both the yield curve and other liquidity measures are cooling off. However, in the short term, there are several reasons to be confident stocks will do well. Seasonally April is the best month for the S&P 500:
The Russia/Ukraine war could drag on but I don’t think a peace deal is priced in to occur soon, while major escalation by Russia is unlikely, leaving more opportunity for positive news for stocks. Economic confidence should also increase as Covid fades further into the background.
I took profits last week on BTG, CCJ, and the more lackluster (for me) GDXJ but remain invested in my larger commodities positions, where I expect strong performance over the coming decade. I may re-enter those positions at a later date. Recently, I’ve tended towards a conservative portfolio of approximately one third each in stocks, cash, and commodities (Silver, Oil, Gold, etc) and don’t expect to deviate much from that until we see some further developments on both the war and money printing fronts.
For the shorter term, I’m looking for a pullback opportunity to invest more in stocks. They are too extended right now. I might explore some option plays but am not eager to buy straight calls or puts in this environment.