The yield curve recession signal is louder and louder. Inversions are persistent and growing.
Let’s compare the spreads today to that of December 18, the start of the December 2018 FOMC meeting.
Yield Curve 2019-02-26 vs December and October 2018
Yield Curve Spread Analysis
Spread Changes
- Yellow: Spreads Collapsed Since October (1 Month to 5 Years)
- Pink: Spreads Remained Roughly the Same (7 Year)
- Blue: Spreads Increased (30-Year and 10-Year)
Something Happening
Something is happening. What is it?
Possibilities
- The bond market is staring to worry about trillion dollar deficits as far as the eye can see
- The bond market has stagflation worries
- The bond bull market is over or approaching
My take is number one and possibly all three.
An in regards to recession the economy is weakening fast.
- Housing Starts: Yet Another Unexpected Thud, Down 11.2 Percent
- Home Resales: Existing Home Sales Down Again: -1.2% Month Over Month, -8.5% Year-Over-Year
- Industrial Production: Industrial Production Dives, Wiping Out a Strong December and Then Some
- Retail Sales: Shockingly Weak Retail Sales: Down 1.2% in December, Sharpest Decline Since 2009
Mike “Mish” Shedlock
What about investors expecting the FED to start cutting rates so they expect rates to be lower in a few years than in 3 months?
Is it possible to have barely positive GDP growth and a recession? We are about to find out. We’re still in a secular bear within a cyclical bull. Powell gave the market a good signal but the market still went down.
Possible black swans this week and next with Cohen and Mueller. The market may sell off on political instability in the United States.
Another recession call? We may hit the 2Q minimum of a recession later in year, but it will be swift. Liquidity and lending are peak. Gonna take another 3-4 years before this thing really comes undone. I expect S+P 3,600 – 4,000 before this whole thing unravels. It’s a bull market and economy.
Are skirts getting shorter? That and yield curve inversion are most meaningful. And how does gender dysphoria influence recession calls? What do the tea leaves say?
“Mish. Is this a formal recession ´call’ or simply more recession ´talk’?”
recession within a year
No compelling reason for a Euro carry trade, buying the back end is smart, no inflation, front end will catch up with equities or vice versa. No big deal here until 30 year gets in the mix. Not really a deficit story story, it’s a getting compensated story in a non-interest rate increasing environment. Fed telegraphed it.
Growth will be hard to sustain with no further tax cuts or significantly rising wages.
Consumer Confidence
How is this different from obama’s trillion dollar deficits? With a much lower GDP and less folks employed during that time period?
My take is number one and possibly all three.
The sale of the 7 year didn’t fare to well today. 7 year dropped 4 bp.
Consumer confidence jumped 10 points to 131 and is within 10 points of its all time high and building permits were up 0.3%. Both are important leading indictors. Its looking like 1st half of 2014, weak 1st quarter and strong (over 3% GDP ) 2nd – 4th quarters
I call BS. CC is not a leading indicator of the economy, but it is a leading indicator of interest rates. The higher CC goes, the more likely rates will rise, which will ensure a recession.
There is no foolproof indicator but 1-5 probably as meaningful as 2-10
The recession indicator is the 2 to 10 year spread, which is still +15 basis points.