Morning Comment: It's Rarely Different This Time

  • Trump wimps out again.
  • More head winds than when Trump's last flip-flop took place.
  • The lag between "inversion" & recession is irrelevant.
  • It's rarely "different this time."

Trump wimps out

President Trump has backed-off once again on his tariff threats...and is getting nothing in return. However, the stock market is facing a lot more headwinds today than it was when the President backed-off the last time. The yield curve has inverted, Hong Kong is at a boiling point, and the European banks have fallen another 14% (they were already down 33% from their 2018 highs).

We invest in stocks & other assets, not recessions.

I keep hearing how the inversion of the 2yr/10yr Treasury yield spread is not a concern because there is usually a lag of 14-18 months before the economy falls into recession.....That is irrelevant. We don't invest in recessions, we invest in stocks and other risk assets.

Yes, sometimes there is also a long lag between an inverted yield curve and a significant decline in the stock market (think 2006/07 and the late 1980s). However, there are other examples of when an inversion was followed quickly by an important decline in stocks.

Near-term support/resistance levels have important intermediate-term implications.

I think it is more likely that a compelling decline will come much sooner this time around. In fact, the battle lines are well drawn on the S&P 500 Index...and a break of either the short-term support or short-term resistance level should be very important to the next significant intermediate move in the stock market. Click here to subscribe to my premium newsletter...and find out more details about what I'm looking at...and which levels I'm watching.

Posted to The Maley Report on Aug 14, 2019 — 9:08 AM
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