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Today's stock market decline is brought to you by the "inverted yield curve"


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Comparisons are typically made between the interests rates of the Treasury's 2-year note and the 10-year note to determine the future direction of the economy.  Normally, the interest rate on the 10-year note is higher than that of the 2-year note.  This is logical because the longer time horizon to maturity means greater risk which requires a greater return in the form of a higher interest rate. 

 

However, in the last few months, these yield curves have begun to converge and are very close to "inversion" whereby the yield on the 2-year note exceeds that of the 10-year note.  What this means is that the 2-year note is "riskier" than the 10-year one, a situation that really only occurs when the bond market expects an economic contraction or a recession.

 

Right now the yield curve is the flattest its been since 2007

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1 hour ago, CitizenVectron said:

Just in time to hamstring another Democratic president!

I still think the bigger timing issue is that Trump can tell people the downturn is the fault of the Dems because everything was great until they won big in the midterms. And people will fall for it.

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58 minutes ago, SFLUFAN said:

One isn't getting elected in 2020 so you don't have to worry about that!

There's literally no one who can appease the large progressive wing and the spineless, mushy centrist wing. Add in the racial and gender tinderbox that is the Democratic party and the general stupidity and susceptibility to dumb social media propaganda by the American electorate, we're in for 8 years of trump, should we be so unfortunate that his cheeseburger diet doesn't take him first

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The lags have varied, so it could take over a year after inversion for the official recession to start, but definitely count on some pain in 2019/2020 if it inverts soon.

 

And, yes, Trump might get stuck with the blame, but that doesn’t mean the Dems won’t, too.  Recession rage knows no political allegiances amongst the populace.

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20 minutes ago, Signifyin(g)Monkey said:

The lags have varied, so it could take over a year after inversion for the official recession to start, but definitely count on some pain in 2019/2020 if it inverts soon.

 

And, yes, Trump might get stuck with the blame, but that doesn’t mean the Dems won’t, too.  Recession rage knows no political allegiances amongst the populace.

Electorally it doesn't bode well for the president and his party.

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17 hours ago, sblfilms said:

I still think the bigger timing issue is that Trump can tell people the downturn is the fault of the Dems because everything was great until they won big in the midterms. And people will fall for it.

Out of curiosity, what would be your Cliff-Notes-version, serious answer to someone arguing this? 

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5 hours ago, PaladinSolo said:

500 would be a good thing at this point, now down 650.  Quote of the day from CNBC, lol.

 

"There's concern that the trade deal is not as good as [President Donald] Trump said it was," said Mark Esposito, CEO of Esposito Securities. "Recession fears are also settling into the market."

 

It recovered.

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Our trade war with China isn't helping, even though I am tired of China stealing IP. It would be nice if Trump lifted all our tariffs on everyone else. We are overdue for a recession. The bond market is starting to show it. Higher rates are going to start hitting all these companies that borrowing a bunch for dividends and buybacks. I just don't think our economy can handle rates going up much more.

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  • 2 weeks later...
7 minutes ago, b_m_b_m_b_m said:

Every fed chair who came of age in the late 70s/early 80s needs to resign. This isn't the age of the inflation boogieman. We're losing a generation to student debt and out of reach high asset prices, and they're single-mindedly focusing on something that isn't there

It's essentially a residual cognitive holdover from the days of the gold standard.

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