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The Present Declining Yields Despite Fed Rate Cuts Historically Indicates Big Economic Woes Ahead

The present declining yields indicates big economic woes ahead. Despite the Fed’s recent rate cut to stabilize the economy, yields are plunging instead of going up. And that’s very bad news for the economy and the stock market. Only two times in recent history – just before the crash of 1987 and the great financial crisis of 2008—have yields plunged as much as now. The chart below shows plunging yields and Fed cuts followed by big drops in the S&P 500 in 1987 and 2008.  In fact, this is yet another of a number of warning signs we’ve published in recent charts of the week that there’s big economic troubles ahead.  They include the fact that globally negative yields of the safest sovereign bonds are at record highs and that manufacturing is falling around the globe.

The Present Declining Yields Despite Fed Rate Cuts Historically Indicates Big Economic Woes Ahead
The Present Declining Yields Despite Fed Rate Cuts Historically Indicates Big Economic Woes Ahead.

The chart above was created by macro analyst Otavio (Tavo) Costa.

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Brad Lamensdorf

Brad Lamensdorf, the founder and portfolio manager of Active Alts, is a principal and co-manager of the AdvisorShares Ranger Equity Bear ETF. He previously managed a long-short investment partnership from 1998-2005 under the name Tarpon Capital Management. Earlier in his career Mr. Lamensdorf was an equity trader/market strategist for the Bass Brothers’ trading arm. He managed a short only portfolio in addition to co-managing a $1bil hedging program. He also served as in-house market strategist for the entire internal and external network of Bass Brothers money managers.

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