Don’t Panic. Yet. | Metals Mine

  • Don’t Panic. Yet.

    From blogs.uoregon.edu

    OK, well that was kind of a crazy day. Equities gave up yesterday’s gains and then some as bond yields dropped. The 30 year bond yield hit a record low and the 10s2s spread slightly inverted, stoking fears of recession. In my opinion we should be reasonably concerned about the outlook as recession risks have risen but recognize that a.) the time between yield curve inversion and and recession could be long and b.) the Fed has been and will continue to be more dovish in the wake of the inversion than they have been in the past. On the other hand, the risk of continued chaotic policy out of the White House is high ... (full story)

Comment Options
EF5
Aug 14, 2019 9:48pm
Permalink
There are a few reasons the yield curve may not be a reliable predictor:
- There haven't been many modern business cycles so we shouldn't be too confident this will continue to work.
- The yield curve has worked well in the US, but doesn't work as well in other countries.
- Yields haven't been this low when the YC inverted in the past.

It would be naive to assume 'this time is different', but for the reasons above I think it's also somewhat naive to assume this time will be the same. The YC is just one thing I consider, there are a number of other leading indicators that are still holding up well.
Reply
  • Story Stats