Treasury Yields Invert: Recession Indicator for the Ages
A historically accurate indicator of a coming recession was triggered on Friday, as the 3 month T bill interest rate exceeded that of the 10-year Treasury bond. What this means is that short term government bonds are producing more return on investment than longer term instrucments, showing that investors have a weak view of the economy long-term.
In other words, the yield curve inverted.
What’s Driving this Stock Market?
The Federal Reserve recently admitted they had no plan to raise interest rates any further for 2019, basically admitting defeat in a plan to raise rates at least 4 times this coming year. After raising rates in 2018 several times to a nominal rate of only 2.5%, the stock market began a long-term dive starting in October, and had a spectacular price drop on Christmas Eve in 2018.
What this means is that the Federal Reserve is confessing that the economy is not that strong after all, and without near zero % interest rates to guarantee more free money injected into the equity and bond markets, the Dow Jones, Nasdaq and S&P 500 don’t have a leg to stand on.
Federal Reserve Buys Time… for Now
After reversing course during the Christmas holidays on future rate hikes, the Federal Reserve has shown their hand, and if you read between the lines you can see that they’re not against dropping rates back to zero, if not going into an area of negative interest rates- charging you money for simply holding your money in a bank.
But this is the result of 10 years of quantitative easing, money printing, tax cuts for the rich corporations resulting in no more than their own stock share buybacks- events which have occurred in a time where consumer, corporate, national, and worldwide debt have soared to a combined $250 trillion which at this point, everyone admits can never be paid off.
So as we sit and wait for the global debt default, it will be interesting to see what happens while housing markets around the world continue to slide, the student loan bubble rises to new heights, and now record retail location closures and people missing their car payments for 3 months straight.
Gold and Silver are About to Skyrocket in Price
Indeed, the economy is not as strong as the “experts” have been saying, and central banks around the world are quietly buying up and hoarding gold. Gold and silver are at all-time historical lows, and many think precious metals are the last undervalued investment available since BitCoin crashed in 2018.
A great way to invest in gold and silver is to simply buy it yourself from APMEX.com. If you have a 401K or IRA and want to take out a significant position in metals, a Gold IRA rollover could be beneficial to your overall portfolio, providing tax benefits, allowing for physical possession and ownership of real gold, and enabling investors to take delivery at a time of their choosing.
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