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Inversion

Jan 07 2023

A “Curve”-Ball We Didn’t See Coming...

  • Jan 7, 2023

Market veterans know there’s just one thing more probable than a recession after the yield curve inverts: Yield curve denial among a large group of sell-side economists and market strategists! Indeed, the earliest of those dismissals occurred last March—a month before the first of more than a dozen iterations of a yield curve inversion. 

Dec 07 2022

The Inversion Before The Inversion

  • Dec 7, 2022

We found the spread between the “Expectations” and “Present Situation” series (the “Confidence Gap”) has historically moved almost in lockstep with the yield curve. As the Confidence Gap plummeted throughout 2021, the implication was the yield curve would soon follow. After some initial resistance, it did. 

Nov 05 2022

Which Yield Curve?

  • Nov 5, 2022

Last month’s inversion in the 10-Yr./3-Mo. Treasury spread further tilts an already lopsided scale in favor of a U.S. recession in 2023. That spread has been considered the gold standard from an economic forecasting perspective, and is the basis for the New York Fed’s Recession Probability estimate (which, by the way, should break above its critical 35% threshold when it’s published later this month.)

Aug 05 2022

The Yield Curve: Two “Perfect Records” At Stake

  • Aug 5, 2022

Yield curve action is getting harder to dismiss by the day. But which curve is the most relevant? We tried to answer that question in disciplined fashion in April. To our surprise, the “2s10s” spread that’s ubiquitous in bond-land scored near the bottom of the pack.

Feb 05 2022

Too Early For Curve Watching?

  • Feb 5, 2022

Last month, we published a table showing where we thought a variety of economic and financial-market measures lay along the economic recovery “continuum.” Although the upturn has officially entered just its 22nd month, the bulk of those measures looked “late cycle” in nature.

Feb 05 2022

What “Causes” Inflation To Decline?

  • Feb 5, 2022

Last year’s consensus view that inflation would prove “transitory” missed the mark. There’s no reason for shame; inflation forecasting hadn’t been a required investment skill for the previous 30 years.

Sep 10 2021

Why Is Confidence “Inverted?”

  • Sep 10, 2021

Stimulus and soaring stock prices have contributed to the fastest consumer-confidence rebound of any economic recovery on record. Yet the manner in which this bounce has unfolded is anything but “early cycle.”
 

Nov 15 2019

Questioning The Monetary Rebound

  • Nov 15, 2019

This year’s upswing in money-supply growth has been one of many factors that’s prevented our economic work from triggering a recession warning. Following a two-year decline, year-over-year growth in M2 bottomed near 3% late in 2018 and has trended upward all year, reaching 6.7% in the latest week (Chart 1).

 

Oct 05 2019

More Yield Curve Musings

  • Oct 5, 2019

The U.S. yield curve inversion has lasted long enough that even a few economic optimists now concede it will ultimately prove significant.

Oct 05 2019

More Trends We Don’t Find Friendly…

  • Oct 5, 2019

The yield curve’s ten-month moving average inverted in September, hence the yield curve inversion can no longer be dismissed as transitory; the Boom/Bust Indicator remains below its descending 10-month moving average, confirming economic weakness predicted by the yield curve; and, the “Present Situation” component of September’s Consumer Confidence survey slipped below its 10-month moving average for the third time in 2019.

Apr 05 2019

Inveighing Against The Inversion

  • Apr 5, 2019

Some recent headlines are word-for-word regurgitations of those published in response to the early-2006 yield curve inversion. In that case, the naysayers were temporarily correct, as both the U.S. economy and stock market pushed higher for another year and a half before rolling over.