dChan - Q Origins Project Archive

MARKET SNAPSHOT: This Time, An Inverted Yield Curve Suggests The Stock Market Has Already Peaked, Some Analysts Say

(some sanity returning to fin media?. Usually it's just brushed off as an 'event' that has no bearing on anything based in realty….it does)

(marketwatch via mkt screener)

3 of past 7 recessions have seen stocks peak before recession takes hold

Slowing economic growth and an inverted yield curve has many investors worried about a potential recession in the next year or two, but also has them excited for the heady stock-market returns that have often been sandwiched between an inverted yield curve and the subsequent economic downturn.

(what you need to factor in is that the rates trending down do not necessarily translate into lower rates on your mortgage, car loan etc.)

But some analysts and economists are warning that statistical averages can be misleading, and that there is reason to believe that the latest yield curve inversion signals returns for the rest of year will be tepid at best and that the stock-market top may already be in.

(Overall trading volumes have been well-below average for several months and the same today)

Oliver Jones, market economist for Capital Economics told MarketWatch that while it is sometimes the case that stocks continue to deliver strong returns for many months after a yield curve inversion–as they did in the lead-up to the 2007 stock-market peak–it is by no means the rule, and already weakening economic data suggests that equity investors won't be so lucky this time around.

"We already see evidence of payroll growth slowing, retail stales beginning to weaken and less U.S. demand for imports, at the same time that we're seeing signs of a corporate earnings slowdown," Jones said, arguing that these weren't traits the economy displayed at the time of the 2006 yield curve inversion.

An inverted yield curve is a situation where short-term interest rates sit at or above long-term rates, a dynamic in the government-debt market that can be a precursor to an impending recession, as it indicates investors believe that growth will be weak.

On Friday, the yield on the 10-year Treasury note fell below the yield on the 3-month T-bill . An inversion of the 10-year/3-month curve is the most reliable indicator of potential recession, according to researchers at the San Francisco Fed, having preceded the past seven such downturns.

Others have argued that stocks are likely to repeat a pattern that's seen stocks, on average, gain ground in the months after the curve initially inverts – a phenomenon they attributed in part to investors reallocating to equities in response to lower yields, as well as a typically more accommodative stance by the Federal Reserve.

https://www.marketscreener.com/news/MARKET-SNAPSHOT-This-Time-An-Inverted-Yield-Curve-Suggests-The-Stock-Market-Has-Already-Peaked-So–28255939/

Demystify financial terms and language here:

https://www.investopedia.com/

Inverted Yield Curve

https://www.investopedia.com/terms/i/invertedyieldcurve.asp