Cyclical Stocks Responding to Steepening Long-term Yield Curve

Cyclical Stocks Responding to Steepening Long-term Yield Curve Keep in mind that the Fed has little influence on the long end of the yield curve. And currently, the 30-year Treasury rate minus 10-year Treasury rate spread has a normal upward slope, like in the mid-1990s when the economy was growing. The chart below shows that the…

Lower Returns for Stocks in the Next 12 Months?

Lower Returns for Stocks in the Next 12 Months? Morgan Stanley’s cyclical indicator is flagging “downturn.” The yield curve’s slope, debt issuance, consumer confidence, economic and financial markets data are aggregated in Morgan Stanley’s cyclical indicator. The entry into the “downturn” phase suggests lower returns for stocks and risky assets in the next 12 months. Image:…

Recession Indicator to Watch: Net Domestic Investment to GDP

Recession Indicator to Watch: Net Domestic Investment to GDP Net Domestic Investment to GDP is in a long-term downtrend since 1950. It is not a timing indicator for predicting the end of business cycles. But historicammy, before recessions, it tends to peak (red arrow) and then decline (black arrow). Currently, Net Domestic Investment to GDP has a…

Why the Current Business Cycle Can Continue?

Why the Current Business Cycle Can Continue? Even if we are in a late business cycle, real Fed funds rate is near zero, the Fed remains “patient” at the moment and has little influence on the long end of the yield curve. The 30-Year Treasury Rate minus 10-Year Treasury Rate spread has a normal upward…

Yield Curve Inversion

Yield Curve Inversion A yield curve inversion is a necessary condition for a recession, but it is not a sufficient condition. We also need a widening of credit spreads and higher real interest rates. And currently, the long end of the yield curve has a normal upward slope. You may also like “Why the Current Business…