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On this morning's call, we highlighted that the US yield curve is starting to flatten again. This, on balance, is one of the primary reasons why I have a zero position allocated to US equities.

Primarily, this flattening is a function of the long end of the curve coming in hot in the last week. Today 10yr yields in the US are making new lows, trading all the down to 2.69%. Financial models work when the yield curve is steepening (borrow short, lend long), not flattening. Financial liquidity builds from a base of real savings. Real savings do not appreciate when the return on that capital is cut to zero (Japan).

Take a look at the nominal interest rates at Europe below: 1. they are higher than the US rate, and 2. monetary policy has not been neutered yet (they can still actually cut rates and have it matter on the margin).

The balance of global economic power is shifting. The world is gaining what the compromised American central bankers are giving up. The US stock market got clocked yesterday for a lot of reasons. This is one of the big ones.
KM