Monday, March 5, 2018

Yield Curve - Predictiveness

The yield curve, which plots yields across Treasury maturities, is still by far the most accurate predictor of recessions, according to new research released Monday by the San Francisco Federal Reserve.

The spread between 2- and 10-year yields is a widely watched section of the curve for its indications of economic health.

An upward sloping curve, with longer-term yields higher than their short-term counterparts, is typical, especially in an expanding economy. An inversion between these two maturities — in other words, if the yield on the 2-year is higher than the 10-year — reliably predicts low future output growth and indicates a high probability of a recession, the Fed branch said in its report. An inverted yield curve has correctly signaled all nine recessions, with only one false positive in the 1960s.

Read more here:

Friday, September 18, 2015

Stock Market Update (9/18/15)

It has been a long time since we posted.  Our stock signals have mostly remained steadily long during the stock markets's rise over the past year-plus.

Recent volatility due to "China worries" and the "FED interest rate watch" have increased volatility and led to several relatively sharp declines.  Although there have been several sharp moves downward, investors should note that the S&P 500 is only about -5% to -7% off of recent peaks.  In addition, stocks are 15% to 20% higher than they were two years ago.

Still, based on recent market action, here are our stock market indicators:

  • Long-Term Indicators are currently neutral, and are looking towards market action for a potential change in signal.
  • Intermediate-term models are currently mildly short; the market seems overbought. 
  • Short-term indicators follow the current trend and are too short-term to report regularly.  
It is noteworthy that other markets we trade - such as currencies and commodities - helped to cushion the decline in the equity markets the past few months.  

Good luck!