This week the big ‘R’ word is doing the rounds as the UK joins the US and our yield curve inverts. Last week’s readers will be aware that inverted yield curves are a seemingly odd situation where you get paid LESS interest for longer-term lendings. If we lend our money to the UK Government for 10 years (this is called a ‘bond’ or a ‘gilt’) they will give us a skinny 0.45% interest in return. Compared to a 2 year bond which is paying a marginally higher 0.5%.
This situation is the economic equivalent of institutions hiding under the bed because there’s an inflation monster and a stock market gremlin outside, and begging a big safe grown-up to look after everything for them until the nasty things have gone away.
It seems clear that even if we put the trade war spats to one side, growth is slowing across the world and bull markets will not continue forever. So when might this recession hit? There’s no need for any knee-jerk reactions. On average, these yield curve inversions have typically happened about 18 months before recessions bite. And if you think history still applies to today’s slightly odd markets, then received wisdom suggests that we have between 3 and 22 months of stock market growth left before the balloon pops.
According to CNN, “ For the 10 yield curve inversions since 1956, the S&P 500 peaked with approximately three months of the inversion six times.”
The vile one across the Atlantic has surpassed himself in response to gloomy economic news and blamed the media who are clearly engineering this whole situation to hurt him. “The Fake News Media is doing everything they can to crash the economy because they think that will be bad for me and my re-election.” Dear me. One can but feel great and renewed pity for Ivanka. I don’t think I’m part of the Fake News Media gang, but I would humbly suggest that the most basic analysis of the global economic data suggests that things look a bit cruddy!?
I’ll sign off with a tweet from Man Baby which I think provides disturbing insights into how he will respond to less buoyant stock markets. Arguably more disturbing for grammar pedants who will take great umbrage at the liberal use of capital letters and passive aggressive Exclamation Marks!!!!!!
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