Zero Hedge: Probably nothing…
The last two times the spread between 30Y and 5Y Treasury bonds was below 90bps, the US economy entered recession. more …
Opinion: The global markets have become complacent. Since the 2016 election, over $5 trillion in wealth has been created and while the left would have you believe that Donald Trump had nothing to do with it, they are wrong.
Much to the chagrin of the progressive left, Donald Trump has rolled back over 800 job killing regulations, exited the US from the economy killing Paris climate accords, kept major companies from moving factories abroad, and given hope to small business, the back-bone of job creation that tax relief is on the way.
But with all that optimism in the equity markets, investors may have overlooked some important information. The Federal Reserve has been jawboning a rise in interest rates for two years. The main reason is that lowering interest rates is the best tool the Fed has to stimulate the economy in case of a recession.
With inflation remaining below 2%, the Fed risks cutting off economic growth by raising interest rates. Inflation has remained stuck at between 1.50 – 1.7%.
The second reason to be cautious is that the bond market is signaling that a recession is on the horizon. A recession is defined by two consecutive quarters of negative GDP Growth Domestic product.
While things look great right know, complacency in markets can signal trouble ahead.