Yield Curve Flips As Uncertainty Spikes

This is an abridged version of our recent reports and notes. For immediate access with no obligation, sign up for a 30-day free trial now.


The most widely watched Treasury yield curve un-inverted in recent days, triggering some calls that now the risk for stocks has declined, that the worst is over. But that is backwards, as the initial inversion usually isn’t the trigger for trouble in stocks, that comes after the curve starts to normalize.

Forward returns in stocks were weak once this curve started to normalize, especially in some of the more cyclical sectors.

Trade(ing) Uncertainty

One moment "trade talks are going well", the next moment "trade talks turned sour", then trade talks "turned better again". Perhaps this is why the U.S. Economic Policy Uncertainty Index has spiked to the highest level since Brexit in 2016.

When the Economic Policy Uncertainty Index exceeded 500 in the past, the S&P's returns over the next 3-6 months were mostly bullish. Gold, however, did not do well over the next few weeks and months...

The post titled Yield Curve Flips As Uncertainty Spikes was originally published as on SentimenTrader.com on 2019-10-14.

At SentimenTrader.com, our service is not focused on market timing per se, but rather risk management. That may be a distinction without a difference, but it's how we approach the markets. We study signs that suggest it is time to raise or lower market exposure as a function of risk relative to probable reward. It is all about risk-adjusted expectations given existing evidence. Learn more about our service , research, models and indicators.

Follow us on Twitter for up to the minute analysis of market action.

Not ready to signup up for a free trial yet?

Signup for our Daily Lite email to receive highlights of our daily report, research and studies.

Follow us on Twitter:

Subscribe to our Youtube Channel:

RSS Feed

Subscribe to the Blog RSS feed