Another Yield Curve Red Herring

After first inverting last year, the 3m10y yield curve recently re-inverted, prompting the usual slew of mechanical recession predictions. However, not all inversions are equal. The top-left chart shows that almost all of the YTD decline in 10y yields is from the fall...

Momentum under fire as confidence softens

With consumer confidence measures released a couple of weeks ago, we have observed an interesting divergence between the University of Michigan consumer sentiment index and Conference Board consumer confidence index (top-left chart). When we plot the spread and...

Trading a Bear Market

This post was taken from our January 8th weekly report. We would characterise US equity indices today as being in a bear market. The official definition is a 20% decline from the recent high, close to close, but what does this mean in practice for investors? (The...

Headwinds for Housing and Autos

Earlier this year we wrote a Thematic piece on autos arguing that we would see auto companies cut prices to move inventory, idle plants and produce fewer cars. We have already seen a slowdown in car sales, and some manufacturers have guided to lower production this...

Peak in Heavy Truck Sales Point to Cyclical Pain

Heavy truck sales are oddly a good leading indicator for the economy.  It is odd because a lot of industrial production is coincident with the business cycle.  However, if you go back over forty years, you can see that recessions have always been preceded by a decline...

The Market and the Economy

We discussed earlier last month how investors should not confuse the market and the economy.  The market might be volatile and suffering losses at the moment, but the US economy is still ambling along.  Manufacturing is likely in a recession, but the service sector is...