Monday, August 19, 2019
MARKET PLUNGE - LET'S TEST THE PREDICTIONS
On Wednesday, 8/14/2019, the Dow plunged 800+ points. One factor was an "inversion in the yield curve". Specifically, the 10 year T-Note yield dipped below the 2 year T-note yield. (Both yields were about 1.6% and differed by only about .02 % , very briefly.)
On CNBC, they showed a chart that claimed that (at least) since 1978 an inverted yield curve was followed by a pattern. Here are the dates, results and the implied forecasts.
The inversion was so brief that unless it recurs, these forecasts should be heavily salted. On the other hand, in May there was an inversion of the 3 year T-Note and the 10 year T-Note, so these "predictions" could happen 3 months earlier than described below.
So... here are the dates and the numbers, in writing(!), and we can test these "predictions" over the next two years.
As of 9:00 AM 8/14/2019
S & P 500: 2926.32
After an inversion of the yield curve:
A] - 12 months later, the S&P 500 was up an average of 12%.
"Prediction" - on 8/14/2020 (before the election), the S&P will be at 3,277.
B] 18 months later the the market turns negative.
"Prediction:" - on 2/14/2021 (Shortly AFTER the next inauguration) the markets will all go negative.
C] - 22 months later, there is a recession
"Prediction:" June 2021, there is a recession.
Whoever is elected -- in fact, whoever is running -- should keep this history in mind, in planning for the future. Whoever wins may have an economic tiger to control. Remember, the last big economic problem occurred at the end of the Bush administration, in the summer and fall of 2008, during the election, and required the attention of both candidates. Bipartisan cooperation prevented an even worse recession than actually occurred. On taking office, the economy was an immediate priority of the Obama administration. Adroit action set in motion the current long bull market.
Made even more difficult by the current political environment, during this election and after it will be critical, in a crisis, for the presiding administration and the opposition to find effective measures than can command bipartisan support, to prevent economic damage to the entire nation.
2019-08-23 >> Yield curve inverted again (!) when market plunged again.
THE YIELD CURVE - WIKIPEDIA