While many market participants are working out plans to position themselves (we can help you with that by the way), bond yields around the world are cascading to new lows as investors are worried about recession, the lack of progress in US-China trade talks and the new concerns about the UK and a Brexit that has the new PM Boris Johnson asking the Queen to suspend parliament. Many strategists now expect yields to go lower, just as September ushers in a new wave of economic reports from the US, EU, Japan and China as well as a new round of meetings for Central Banks.
1. I have been focused on Mr Tom Lee of Fundstrat Global Advisors. Tom has produced some very interesting research recently that suggests the inverted yield curve is important, but recession, as he points out in the 2005 to 2008 period, comes many months after. He uses a series of searches and key worlds used to make his point. I suggest you look into Fundstrat.
2. Gregory Faranello, head of US rates at Amerivet Securities points out the long list of external factors that are impacting the US bond market and he sees, for now, no changes. He does make a clear point about liquidity being an issue and now, the UK and Brexit have entered and with the trade war, “this global yield structure just continues to unfold.” Clearly fear and uncertainty of the future will weigh heavy and bond yields will likely keep falling into a sinkhole.
An idea. When yield curves invert it is natural that we all pay close attention. However, the initial inversion and subsequent recession has a very distinct time gap. Some are saying that a US recession has a 40% chance of taking place but could be 12 months away – or longer. For now, I will continue to present ideas on Nikkei 225, USDJPY and tech packages.