My Inversion Forecast Technically Met And This Can Be Bullish For The Economy


At the end of 2017, my forecast was for yields to invert in 2018. Typically that is a recessionary forecast. I believe I was the only one on record to have that forecast that in 2017.

“I am also looking for yields to invert in 2018.”

At the end of 2018, my forecast was for the 10-year yield to go below 2% if world trade got weaker. I believe I was the only one on record to have that forecast in 2018

“For 2019, I am sticking to my call that the 10-year yield will channel between 1.60% to 3%.  If world trade gets weaker, we could see the 10-year yield with a 1% handle again.”

Currently, the 10-year yield is at 1.60%

Here is a recent clip of my interview on Bloomberg financial talking about the 1.60% 10-year yield

I truly believed we inverted the yield curve last year and I accepted the timing recessionary implication of that event. We got as near 9 basis point spread late in 2018 and then the 2-year yield really starting to act more aggressively headling lower in yields to prevent the technical 2/10 inversion from happening. However, I took that day to be the actual inversion. Now the Fed has cut rates once and look for them to cut again.

I believe this event today is going to be a net bullish event for 2020. This is my logic on this premise. I think the pullback on trade tension yesterday was to try to keep the 2/10 inversion from happening which failed. I believe the Whitehouse now knows that it is running out of time in terms of escalating trade tension with China.

“It’s going to be very difficult to go into an election year with an inversion headline, weaker domestic PMI data, and a 3rd farmer bailout. This with the stock market flat since 2018, when the trade war tap dance started. “

No recession talk here, I still have my 3 recession flags left that needs to be raised before I use the R-word.

That model  can be found here:

Leading economic indicators while staying flat for 12 months roughly hasn’t gone negative yet.

From Doug Short:

So I am looking at this event as a net bullish economic event because I am assuming that this ends the trade tap dance war escalation for now. Those sectors that have been impacted negatively can get some relief in 2020.

Logan Mohtashami is a financial writer and blogger covering the U.S. economy with a specialization in the housing market. Logan Mohtashami is a senior loan officer at AMC Lending Group,  which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data  daily on his own facebook page