The Yield Curve Bounced Back... But Bulls Beware
After inverting for the first time since 2019, the 2-10 Yield Curve has popped back into positive territory, fluctuating within the 7-11 basis point arena as it trepidatiously avoids a reinversion.
That being said, the worst is nowhere near over. The 1-Year Forward Yield Curve (the expected 2-10 Yield Curve, in one year from now) is at an all-time low, currently at -67 bps.
Why does that matter? Well, if you give any credence to history...
Inversions are 3 for 3 on preceding large declines in the stock market, and 2 for 3 on those declines coming 1-2 quarter thereafter (since 1995). And here's just how large they were...
THE PAST THREE CURVE INVERSIONS:
- Year-End 1999: The market peaked in August 2000 (3-6 months later)… and then lost -40% over next 2 years
- Year-End 2005: The market peaked in November 2007 (18-24 months later)… and proceeded to lose -45% over next 18 months
- Summer 2018: The market peaked in mid-September 2018 (3 months later)… and dropped -20% over next 3-4 months
These are unprecedented times (not to be hyperbolic, but they genuinely are), meaning headlines are filled with confusing B.S. and effective macro risk management becomes critical… and as always, we’re here to help.
This (whacky) environment calls for an aptly-timed Hedgeye semi-annual classic…
THE HEDGEYE INVESTING SUMMIT: LIVE APRIL 11-13
3 DAYS. 9 INTERVIEWS. Actionable, in-depth, alpha-generating insights. Hedgeye Founder & CEO Keith McCullough goes live one-on-one with the brightest investing and geopolitical minds in Macro.
We are excited to bring you Hedgeye’s 8th Semiannual Investing Summit—the pinnacle of HedgeyeTV’s “Real Conversation” Series—starting this Monday April 11 through Wednesday April 13 from 11:00am-1:00pm ET each day.
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- Kyle Bass, Founder & Chief Investment Officer of Hayman Capital
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- Buddy Carter, Private Investor and Former Senior Exec at Goldman Sachs & Lehman Brothers
- Danielle DiMartino Booth, Former-Fed Insider and CEO & Chief Strategist at Quill Intelligence
- Jim Chanos, Famed-Short Seller & Founder of Kynikos Associates
- Carson Block, Another Heavy-Hitting Short Seller and Founder of Muddy Waters Research
- Jim Bianco, President of Bianco Research and Multi-Decade Macro Strategist
- Dr. Pippa Malmgren, Economist, Entrepreneur & Former Special Assistant To President George W. Bush
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