The bar chart is the US10yr yield minus the US 3month yield. Over the last 30 years the spread has ranged regularly between roughly +375bps and negative 75bps. After hitting extremes it usually heads back very quickly in the opposite direction. Note the turning points from the lows (red lines). It looks to me like we are about to re-steepen sharply.
The orange line is the S&P 500 Index. Note around the yield curve turning points (red lines) the major stock market peaks - the yellow boxes.
Whilst not a perfect indicator given length of time-frame and limited number of observations, the evidence at least to me is very compelling. I am short high beta stocks. The TOP may be in already or there me a short period of additional gains but in my experience the next BIG move in stocks is DOWN.
The orange line is the S&P 500 Index. Note around the yield curve turning points (red lines) the major stock market peaks - the yellow boxes.
Whilst not a perfect indicator given length of time-frame and limited number of observations, the evidence at least to me is very compelling. I am short high beta stocks. The TOP may be in already or there me a short period of additional gains but in my experience the next BIG move in stocks is DOWN.
Comment:
Yield curve inversion and resteepening DOES work....AGAIN as forecaster of SPX forward returns