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A Bird's Eye View Blog

Fireside Charts: Yield Curve Inversion Aftermath, Interest Rate Expectations, and a U.S. Economic Growth Slowdown

By:BCM Investment Team | Date:Mar29, 2019 | Category: Equity, Economics, Market Highlights, Fireside Charts

We tried to look for charts that would "Lyft" our spirits about the economy this week, but fell slightly short. Hopefully the IPO today won't do the same. First, a look at returns for holding periods up to 30 months after a yield curve inversion. Have you seen a chart similar to this before? Next, based on interest rate expectations, the FED could make zero moves this year and still disappoint. Can the equity markets keep ignoring the bond markets? If so, for how long? U.S. growth and manufacturing is slowing, but not yet contracting. Meanwhile, Japan re-enters contraction territory. 


1. This chart looks eerily similar to our study on the Anatomy of a Bear Market.

 3.29 chart 4

Source: WSJ Daily Shot, as of 3/28/19



2. Is this the smart money?


3.29 chart 5

Source: WSJ Daily Shot, as of 3/28/19



3. What does the sum of all the stock buy-backs look like?


 3.29 chart 6

Source: WSJ Daily Shot, as of 3/28/19



4. Wednesday we shared our neighbor's yield curves...here is Germany and Japan. Can a yield curve invert with negative yields? They're certainly trying....

3.29 chart 2


Source: WSJ Daily Shot, as of 3/28/19



5. Meanwhile, we are seeing an inversion here in the U.S.. Is the FED being "out-doved" by other central banks? 


3.29 chart 1 

Source: WSJ Daily Shot, as of 3/28/19



6. As for interest rate expectations, economists are rosy-eyed (green), the FED is being transparent (black), and the markets are expecting cuts (red). Are the market's expectations setting up a massive disappointment?

3.29 chart 15

Source: WSJ Daily Shot, as of 3/29/19



7. Last time I checked, if the FED is buying Treasury bonds, it is QE....


3.29 chart 3

Source: Deutsche Bank Research, WSJ Daily Shot, as of 3/28/19



8. How long can the equity markets ignore the bond markets and economic data?


3.29 chart 7

Source: JP Morgan, BlueChip, CFTC,  WSJ Daily Shot, as of 3/28/19




9. Yesterday Warren Buffet echoed these sentiments in his TV interview... U.S. economic growth is slowing, but not contracting.


3-29 chart 9


Source: WSJ Daily Shot, as of 3/29/19



10. More sentiment like Mr. Buffet's...


 3-29 chart 12

Source: Natixis, WSJ Daily Shot, as of 3/29/19



11. A fairly substantial downward revision...


3.29 chart 11

Source: WSJ Daily Shot, as of 3/29/19



12. A great rebound from the KC FED regional survey!


 3.29 chart 8

Source: WSJ Daily Shot, as of 3/29/19



13. ...As did Korea's manufacturing...


 3.29 chart 14

Source: WSJ Daily Shot, as of 3/29/19



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Disclosure: The charts and info-graphics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are a recommendation to take any action. Individual securities mentioned may be held in client accounts.