Here is what we are dealing with. Chinese yield curve has inverted last week. The yield curve today is the flattest it has been since 2007. With less than 90 basis points separating 30 and 5 year bonds.
It would be reasonable to expect a few more 0.25 bps rate hikes out of the FED. At least two. Yet, most of the compression will come from the long end of the curve.
If history is any guide, most investors are wrongly positioned again. Anticipating some sort of an inflationary spiral. Quite the opposite is about to happen. As recessionary wave hits and deflation once again rears its ugly head, investors should send the long end of the yield curve plunging towards 2016 lows.
At that stage the yield curve will invert and you can kiss this ‘Trump’ recovery goodbye.
In terms of the stock market, the situation is incredibly complex. If you would like to find out what happens next, based on our mathematical and timing work, please Click Here.