So what did happen this week? Cramer characterized it pretty well. “Thanks to a nasty combination of the yield on the 10-year Treasury approaching 3%, a series of disappointments in the consumer products space, some amazingly fast growth in personal and corporate spending, a rally in commodities and a pickup in the trade war with China, we got hit with a flash flood of selling in a number of key groups,” the Mad Money host said.
My biggest concern is the flattening of the yield curve. The 2 year treasury note yields 2.46%, the 10 year yields 2.80% and the 30 year yields 2.96%. Can you see how all maturities are very close to the same yield? If the 10 year were to move to 3.00% it would then have a greater yield than the 30 year. If this were to happen we would have what is known as an inverted yield curve. When this happens it is usually a precursor to a recession. The longer the maturity should provide the greater yield.
The “China Syndrome” (tariff) is still just a childish argument between two very powerful men. Hopefully this will end soon. Semiconductor stocks were most hurt by the latest round of “Tit for Tat”. This led to hurting some stocks in the consumer products space.
I still believe this is short term volatility and I am definitely not predicting a recession. We are still in a bull market with a very strong economy. With an economy this strong a little rise in inflation is to be expected. These are just a few things I am keeping my eyes on.
Have a great weekend.
Your Boring Money Manager,
Mowery Capital Management
We manage risks first
Then we buy quality
And only then do we seek to provide a reasonable return
At the time of this writing:
Dow Jones 24,462.94
S&P 500 2,670.14
Ten Year Treasury Yield 2.80%
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Sources: The Capital Group. Zacks, Seeking Alpha, CNBC, CNBC guest and contributors, Jim Cramer, Wall Street Journal, Investor’s Business Daily, and Financial Times. Special thanks to Wikipedia and MarketWatch for historical facts. If I have inadvertently missed any other sources please accept my apologies. No assurance can be made that profits will be achieved or that substantial losses will not be incurred in connection with any investment. All investments involve varying degrees of risk including loss of capital. This information should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation of any individual investment or strategy. PAST PERFORMANCE IS NO GUARR ANTEE OR INDICATION OF FUTURE RESULTS