Great Economic-Reset Outlook Update
Comment of the Day

August 24 2023

Commentary by Eoin Treacy

Great Economic-Reset Outlook Update

Thanks to a subscriber for this report from Mike McGlone at Bloomberg. Here is a section:

3. Stuff That May Matter More Than Ever In the category of stuff that doesn't matter until reaching extremes: the inverted US yield curve and leading indicators. Our bias is to heed the warnings, particularly in the context of the unprecedented aberrations that got us here. The graph shows the leading index of 10 economic indicators at minus 7.5% and the New York Fed's probability of recession from the Treasury spread at the most since 1982. What might be most significant is the elongated period of near-zero interest rates that buoyed the roughly 600% advance in the S&P 500 from the March 2009 low to the 2022 peak. This period of exceptional risk-asset appreciation may face some normal reversion, particularly because the primary fuel has turned around. The fed funds upper-bound target of 5.5% is the highest since 2001 and may portend headwinds for risk assets.

Eoin Treacy's view

The time when people worry most about an inverted yield curve is at the point it first inverts. What surprises many people is markets then rally because central banks are finally doing something about resurgent inflationary fears. That’s exactly what has happened over the last year.

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