Is the Bond Market Crying Wolf?

Good Morning,

 

This week Business Insider published an article about the Yield Curve inverting and what it means. For those that have ever wondered what this means the main takeaways were:

 

1. When the Yield Curve inverted on March 22nd it was the first time since 2007 (no coincidence that this was before the Global Financial Crisis)

 

2. Inversion means that short term rates are longer than long (in this case the three-month rate is higher than the 10-year rate), and it is a signal of a looming recession (1 to 3 years in advance, others have used about 30 months)

 

3. The article noted that this time it is more about asset bubbles (sound familiar?)

 

While I'm not a doomsday person, we have been in a robust period for a long time (stock market highs, lower volatility, record low unemployment, etc.). Over the past six months, we have experienced a strong correction during the fourth quarter which has lead to a strong first quarter. On Friday Lyft went public which signals to me that private investors see this market cycle ending and they want to cash out of their non-liquid investments. Global growth seems to be slowing down, and Brexit is creating more headwinds in the Eurozone due to uncertainty being prevalent. With all of these events going on across the globe maybe we should be more cognizant of the risk we are taking within our investments (equities, bonds, real estate, business, etc.).

 

https://markets.businessinsider.com/news/stocks/yield-curve-inversion-will-lead-to-asset-bubbles-not-recession-2019-3-1028058233?nr_email_referer=1&utm_source=sailthru&utm_medium=email&utm_content=opening_bell&utm_campaign=post blast %28moneygame%29: 10 things you need to know before the opening bell&utm_term=10 things before the opening bell - engaged%2c active%2c passive%2c disengaged



 


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