Below is a brief update on our U.S. economic outlook from our Macro team in a note to subscribers earlier this morning:
"The short-covering, reflation rally is fizzling with crude down another -3% this morning. Meanwhile, the yield spread is back inside 100 bps as the bond market and yesterday's consumer confidence report continue to re-affirm the slower-and-lower-for-longer reality."
The chart below shows the compression of the 10-yr / 2-year Treasury yield spread despite the Fed's December 15 rate hike. (Note: This is precisely why we're so bullish on Long Bonds (TLT). With slower U.S. growth and yields headed lower TLT outperforms.)
