Jump to content



Photo

The YIELD CURVE & spectacular Q2 GDP


  • Please log in to reply
2 replies to this topic

#1 dTraderB

dTraderB

    Member

  • Traders-Talk User
  • 16,704 posts

Posted 14 July 2018 - 09:14 AM

"YIELD CURVE" has been one of the top economic and financial search items in GOOGLE since the last FED meeting and even 

those of us who never paid any attention to this rather esoteric thing are now trying to find out what does it portend for the markets. 

 

Some care not an iota about, bring it along!  Some are worried but not too much. Others are predicting recession and other gloom ^ doom - but realistic - scenarios if the curve does invert. 

 

Also, there is speculation - apparently informed  - about Q2 GDP rising above 4%. Some say it is a one-off spike that heralds the top, others think it is the start of a massive blow-off than can extend for several more quarters, while very few think it is actually important. 

 

Here is a good article on these topics:

US Q2 Growth Set To Accelerate As Trade-War Risk Lurks

The trade war that appears to be escalating may bring headwinds in the second half of the year, but second-quarter US GDP growth remains on track to accelerate, based on several forecasts compiled by The Capital Spectator. The current median projection calls for real GDP growth in Q2 to rise 3.1% (seasonally adjusted annual rate) – a solid improvement over Q1’s modest 2.0% increase. The Bureau of Economic Analysis is scheduled to publish its initial GDP report for the second-quarter in two weeks (July 27).

Uncertainty about rising trade tensions between the US and China (Europe, too) is a risk factor that could trim economic activity going forward. At the moment, prospects for easing this risk aren’t encouraging. US Treasury Secretary Steven Mnuchin this week told Congress that talks with Beijing had “broken down” and the US was essentially waiting for China to offer concessions — a development that some analysts say is unlikely.

Several members of Congress expressed concern about the Trump administration’s plan (or the lack thereof) for trade negotiations. “The administration needs to explain to Congress where this is all headed,” advised Senator Bob Corker, Republican of Tennessee and chairman of the Senate Foreign Relations Committee.  “To my knowledge, not a single person is able to articulate where this is headed, nor what the plans are, nor what the strategy is.”

Federal Reserve Chairman Jerome Powell is also cautious about how the process plays out. Although he’s optimistic about the current state of the economy, “We are hearing a rising level of concern about the effects of changes in trade policy,” he said in an interview on American Public Media’s “Marketplace” program, Bloomberg reported. “I think this process that is going on now is a new one. It’s very difficult to predict how it turns out and we’ll just have to see.”

The ambiguity raises questions about the economic outlook in the second half and beyond, but the official numbers for Q2 look set to deliver upbeat results. Some estimates for the second quarter exceed 4.0%. Now-casting.com’s revised assessment, published earlier today, is a strong 4.2% (green bar in chart below). If correct, the US economy will post the fastest growth rate in nearly four years.

Although some estimates call for a lesser gain, the common theme is an expectation that Q2 output will accelerate, perhaps dramatically. The Wall Street Journal’s new survey of economists for July, for instance, reflects a median forecast of 4.1% growth.

gdp.cs_.2018-07-13-1.png

Some analysts, however, worry that the improvement that appears due for Q2 data could mark a top.

“It’s very different being an economy that’s accelerating toward 4 percent and an economy that has a brief surge of 4 percent for one quarter,” Gregory Daco, chief US economist at Oxford Economics, said earlier this week.

True, although it’s still unclear which description applies. Meantime, analysts are watching the flattening yield curve and wondering if it’s close to inverting, which would signal elevated recession risk in the months ahead into 2019. The widely followed 10-year-less-2-year rate spread narrowed to a thin 25 basis points yesterday (July 12), an 11-year low.

yld.curve_.13jul2018.png

Data published to date, however, indicates that recession risk is virtually nil. Last month’s business cycle review, for example, revealed that the probability was close to zero that an NBER-defined recession had started or was imminent. The July 8 edition of The US Business Cycle Risk Report reaffirmed the low-risk reading.

The Q2 GDP report that’s due later this month will probably tell a similar story. The question is whether the acceleration in macro momentum can extend into the rest of the year? Given the trade worries, combined with the Federal Reserve’s rate-hike plans that are squeezing the yield curve, the answer is wide open for debate.

When will the next recession strike? Monitor the outlook with a subscription to:
The US Business Cycle Risk Report

 

 

http://www.capitalsp...war-risk-lurks/



#2 dTraderB

dTraderB

    Member

  • Traders-Talk User
  • 16,704 posts

Posted 14 July 2018 - 04:07 PM

A fraudcoin sucker born every minute! 

https://www.ccn.com/...man-sachs-exec/



#3 dTraderB

dTraderB

    Member

  • Traders-Talk User
  • 16,704 posts

Posted 15 July 2018 - 09:46 AM

No evidence BULL market will end soon! 

 

Summary

Market action in the last two weeks confirms the notion that there is no need for radical portfolio changes. Stay the course.

Investors would be well served by concentrating on the facts, not conjecture. The backdrop favors the bears, the price action favors the bulls, draw your own conclusions.

Forget the idea that warnings signs are being flashed because a sector or the market is moving sideways and marking time. Look at the entire picture.

Rising interest rates at THESE levels should be of no concern to investors now.

This idea was discussed in more depth with members of my private investing community, The Savvy Investor.

 

"To me, the "tape" is the final arbiter of any investment decision. I have a cardinal rule: Never fight the tape!" …. Martin Zweig

While the investment landscape has changed, its quite evident that many things have stayed the same. It’s time to prepare for the end of the bull market is still a prominent theme these days. The “concerns” are overwhelming some. This time around I am taking a different approach. My message to anyone that wants to start preparing for the next bear market is to go ahead and do so. Oh it’s not because that is what I am going to do. No, it is a simple fact that no matter how much evidence is out there to dissuade an investor from doing that, some have made up their minds. They have concluded this is the appropriate action now given all of the warning signs.

 

https://seekingalpha...2-s-and-p-500-w

eekly-update-stocks-inexpensive-evidence-bull-market-end-soon