Jerome Powell should have canceled his appearance yesterday. The Fed chief’s comments were vague and, in some cases, he lacked answers.
One thing is clear to me: the Fed does not know what will happen next. They are not sure how long they will have to keep interest rates high, or even whether rates now are restrictive enough to bring inflation back to target.
has indeed dropped a lot, and the labor market is slowing down a bit, but 3.5-4.0% is still too high.
Yield spread of 10-year and 2-year Treasuries – weekly TF
The steepness of the yield curve has increased
The steepness of the bond yield curve is rapidly increasing. The corresponding rose to -17 basis points. Some people think this is a sign of recession, but I don’t think so. In this case, it grows towards the level, rather than the yield on 2-year Treasuries moving away from the yield on 10-year bonds. Big difference.
As long as the 2-year Treasury yield remains around the 5% mark, I will not consider this a signal of recession. Once it starts to decline, it will be a sign that the market is starting to expect lower interest rates, and this is truly a warning of a recession. Now the yield curve appears to be normalizing.
10-year Treasury yield – weekly timeframe
The chart below shows the yield curve in September 2018. This is what a normal curve should look like.
Yield curve
This means that the current curve may become similar to this when the process is completed. This is exactly what I think is happening now. We can only wait and see how it all turns out.
New yield curve
S&P 500 futures target 4240
fell and lost a significant part of the positions gained last week. The remaining part, it seems to me, will also be lost, and futures will roll back to the level of 4240 for now.
S&P 500 futures – hourly timeframe
Tesla shares plummeted
Tesla (NASDAQ:) shares fell 9% back to $220. This is an important place for securities given the support around $214. A breakdown of this level will not bode well.
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2023-10-20 09:05:00
#Fed #doesnt #happen #Investing.com
