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Joseph Y. Calhoun III

Articles by Joseph Y. Calhoun III

Monthly Macro Monitor: Market Indicators Review

24 days ago

Is the recession scare over? Can we all come out from under our desks now?
The market based economic indicators I follow have improved since my last update two months ago. The 10-year Treasury rate has moved 40 basis points off its low. Real interest rates have moved up as well but not quite as much. The difference is reflected in slightly higher inflation expectations.
The yield curve has also steepened as the 10-year Treasury yield rose faster than the 2-year. This is not the type of steepening we normally expect to see just prior to recession by the way. That would be if the 2-year yield was falling faster than the 10-year. On the other hand, the change here is not large even if it is in the right direction.
As you’ll see below, some of our other market indicators are also pointing to

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Monthly Macro Monitor: Market Indicators Review

August 29, 2019

This is a companion piece to last week’s Monthly Macro report found here.
The Treasury market continues to price in lower nominal and real growth. The stress, the urgency, I see in some of these markets is certainly concerning and consistent with what we have seen in the past at the onset of recession. The move in Treasuries is by some measures, as extreme as the fall of 2008 when we were in a full blown panic. That to me, is evidence that this move is overly emotional since the economic conditions today are nowhere near as severe as that time. As Jeff and I have both pointed out, the next recession is unlikely to look like the last one. The banking system, at least in the US, is in much better shape than 2008; bank failures are probably not on the next recession agenda. If we’re right

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Monthly Macro Monitor: Does Anyone Not Know About The Yield Curve?

August 21, 2019

The yield curve’s inverted! The yield curve’s inverted! That was the news I awoke to last Wednesday on CNBC as the 10 year Treasury note yield dipped below the 2 year yield for the first time since 2007. That’s the sign everyone has been waiting for, the definitive recession signal that says get out while the getting is good. And that’s exactly what investors did all day long, the Dow ultimately surrendering 800 points on the day. I don’t remember anyone on CNBC mentioning it – although surely they must have – but by the end of the day the curve actually ended up back in positive territory, the inversion lasting less than a day. So, never mind. Maybe.
Of course, the 10/2 curve is only a small slice of the yield curve and other parts have been inverted for some time. Indeed the Fed’s

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Big Picture: Long-Term Trends In Markets

January 1, 1970

The investment industry is always focused on the short-term, an attempt I think to justify fees through activity. A recent example is the breathless reporting about a short term shift toward value stocks. Value has underperformed for so long that everyone is hyper-focused on finding the inflection point so every wiggle in that direction is hailed as the turning point.

The Last Time the Market Acted This Way, Value Stocks Gained 30 Percent

Institutional Investor, September 23, 2019

Value Stocks Had Been Left For Dead. Their Revival Could Be the Real Deal.

Barron’s, September 17, 2019
Here’s what they’re talking about. This is a chart showing the ratio of the S&P 500 Value ETF (IVE) to the S&P 500 Growth ETF (IVW). When the price is rising, value is outperforming:

Time to shift your

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