Bull markets don’t depend on job growth Today’s biggest investor fear boils down to one thing: recession. While there’s no guarantee that there won’t be a double dip, I can tell you with certainty that another recession now would be unprecedented when you consider the historical evidence.
We have never had a recession after the traditional leading economic indicator (LEI) index has been high and rising for five months. But that’s what is happening today on an absolute and year-over-year basis. For those keen on Ă‚Âcomparing 2011 with the ugliness of 2007–09, note that the LEI back then had been falling for three years.
One component of the leading economic indicators is the yield curve. Bond investors keep a close eye on this as it illustrates the spread or difference between long-term interest rates and short-term ones. It’s always been low or gone negative before a recession. Now the spread is 220 basis points, or 2.2%. In 2007 it was negative. The Fed is foolishly trying to push the spread down by selling short-term bonds and buying the same amount of long-term, but it’s not working.
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We have never had a recession after the traditional leading economic indicator (LEI) index has been high and rising for five months. But that’s what is happening today on an absolute and year-over-year basis. For those keen on Ă‚Âcomparing 2011 with the ugliness of 2007–09, note that the LEI back then had been falling for three years.
One component of the leading economic indicators is the yield curve. Bond investors keep a close eye on this as it illustrates the spread or difference between long-term interest rates and short-term ones. It’s always been low or gone negative before a recession. Now the spread is 220 basis points, or 2.2%. In 2007 it was negative. The Fed is foolishly trying to push the spread down by selling short-term bonds and buying the same amount of long-term, but it’s not working.
Read the rest of the article here.
.
Also check out:
