What Happens When An Indicator Just... Breaks?

[] times they are a-changin’… [View in browser]( [View in browser]( [] JUNE 3, 2024 [] [] PROSPERITY PUB MARKET TALK What Happens When An Indicator Just… Breaks? Wall Street's go-to signal for predicting recessions, the inverted yield curve, is raising eyebrows. The so-called yield curve inversion, where short-term Treasury yields surpass long-term ones, has historically signaled an impending economic downturn. It's been 100% accurate for the past eight U.S. recessions. But this time, things are different. The yield curve has been inverted for a record stretch of about 400 trading sessions — yet the economy hasn't slowed down significantly. In fact, recent data shows that U.S. employers added 175,000 jobs last month, and economic growth is expected to pick up this quarter. Traditionally, an inverted yield curve signals that investors expect the Federal Reserve to cut interest rates to stimulate a faltering economy. But despite the current inversion, the anticipated recession hasn't shown up. Some experts suggest that a recession might just be delayed this time. The yield curve’s track record as a recession predictor is impressive. It gained prominence thanks to Campbell Harvey’s 1986 dissertation, which highlighted the connection between inverted curves and economic downturns. But recent years have been unusual, and some believe the pandemic has disrupted long-standing economic patterns. What Happens When An Indicator Breaks? So, what happens when a trusted indicator like the yield curve just... breaks? If a recession doesn’t materialize soon, it could do lasting damage to the yield curve’s status as a warning system. Investors might begin to question its reliability, leading to a shift in how market signals are interpreted. This could be one of the most significant examples of how the fallout from the Covid-19 pandemic has upended long standing assumptions on Wall Street about how markets and the economy function. Till now, investors have relied heavily on the yield curve to guide their decisions. But if this indicator fails to predict a recession this time, it might lose its near-mythical status. This scenario forces us to consider: Can a single measure from the bond market still forecast the complex U.S. economy, or do we need a more nuanced approach? The current scenario raises questions about the yield curve’s reliability. While it still indicates investor expectations for rate cuts, these expectations may now reflect a more complex economic outlook. For example, the Fed's aggressive rate hikes in the 1980s aimed to combat inflation, not prevent a recession. Similarly, external shocks like oil price surges and the pandemic have influenced past recessions. Despite some weaker economic reports, the yield curve remains inverted. This has become the new normal for many investors. The next few months will be crucial in determining whether this trusted recession indicator is still accurate or if it's time to rethink its significance. Stay tuned as we navigate these uncertain times, and remember to keep a balanced perspective on market signals. — The Prosperity Pub Team [] [] China Stockpiles It… Costco Sells Out Of It.. Gold has been on a record run so far this year… With China stockpiling the precious metal… It seems everyone wants it… Even Costco is selling gold bars in their stores! But you don’t need to build a vault in your basement… especially if you want to capture the best short-term gold trades! [Jeffry reveals how he targets WEEKLY gold gains!]( [] [] TBUZ’S MARKET BUZZ Building A Position In The Hottest Stock (NVDA) TBUZ dives into May’s market action, tells us where he sees June going, and even does a deep dive into one of the hottest stocks: NVDA! He sees the chip maker going higher and he shows how he plans to build a position in the stock! [Click here to watch TBUZ’s market update!]( — The Prosperity Pub Team [] [] [] [] JUNE 3, 2024 [] [] PROSPERITY PUB MARKET TALK What Happens When An Indicator Just… Breaks? Wall Street's go-to signal for predicting recessions, the inverted yield curve, is raising eyebrows. The so-called yield curve inversion, where short-term Treasury yields surpass long-term ones, has historically signaled an impending economic downturn. It's been 100% accurate for the past eight U.S. recessions. But this time, things are different. The yield curve has been inverted for a record stretch of about 400 trading sessions — yet the economy hasn't slowed down significantly. In fact, recent data shows that U.S. employers added 175,000 jobs last month, and economic growth is expected to pick up this quarter. Traditionally, an inverted yield curve signals that investors expect the Federal Reserve to cut interest rates to stimulate a faltering economy. But despite the current inversion, the anticipated recession hasn't shown up. Some experts suggest that a recession might just be delayed this time. The yield curve’s track record as a recession predictor is impressive. It gained prominence thanks to Campbell Harvey’s 1986 dissertation, which highlighted the connection between inverted curves and economic downturns. But recent years have been unusual, and some believe the pandemic has disrupted long-standing economic patterns. What Happens When An Indicator Breaks? So, what happens when a trusted indicator like the yield curve just... breaks? If a recession doesn’t materialize soon, it could do lasting damage to the yield curve’s status as a warning system. Investors might begin to question its reliability, leading to a shift in how market signals are interpreted. This could be one of the most significant examples of how the fallout from the Covid-19 pandemic has upended long standing assumptions on Wall Street about how markets and the economy function. Till now, investors have relied heavily on the yield curve to guide their decisions. But if this indicator fails to predict a recession this time, it might lose its near-mythical status. This scenario forces us to consider: Can a single measure from the bond market still forecast the complex U.S. economy, or do we need a more nuanced approach? The current scenario raises questions about the yield curve’s reliability. While it still indicates investor expectations for rate cuts, these expectations may now reflect a more complex economic outlook. For example, the Fed's aggressive rate hikes in the 1980s aimed to combat inflation, not prevent a recession. Similarly, external shocks like oil price surges and the pandemic have influenced past recessions. Despite some weaker economic reports, the yield curve remains inverted. This has become the new normal for many investors. The next few months will be crucial in determining whether this trusted recession indicator is still accurate or if it's time to rethink its significance. Stay tuned as we navigate these uncertain times, and remember to keep a balanced perspective on market signals. — The Prosperity Pub Team [] [] China Stockpiles It… Costco Sells Out Of It.. Gold has been on a record run so far this year… With China stockpiling the precious metal… It seems everyone wants it… Even Costco is selling gold bars in their stores! But you don’t need to build a vault in your basement… especially if you want to capture the best short-term gold trades! [Jeffry reveals how he targets WEEKLY gold gains!]( [] [] TBUZ’S MARKET BUZZ Building A Position In The Hottest Stock (NVDA) TBUZ dives into May’s market action, tells us where he sees June going, and even does a deep dive into one of the hottest stocks: NVDA! He sees the chip maker going higher and he shows how he plans to build a position in the stock! [Click here to watch TBUZ’s market update!]( — The Prosperity Pub Team [] [] [] [] ABOUT US: We believe that the opportunity for financial literacy and freedom belongs to all people, not just those who already have years of investing experience. Prosperity Pub provides an array of educational services and products that will help you navigate the markets and become a better investor. Trading is made simple through our online forum full of trading techniques to give you the best tools to kick-start your investing journey. We offer collaborative webinars and training; we love to teach. No matter the opportunity, we bring together a strong community of like-minded traders to focus on analyzing market news as it’s presented each day. DISCLAIMER: FOR INFORMATION PURPOSES ONLY. The materials presented from Prosperity Pub are for your informational purposes only. Neither Prosperity Pub nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational purposes intended is at the user’s own risk. DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. Prosperity Pub is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions. Please visit [( for our full Terms and Conditions. [Unsubscribe]( This email was sent to {EMAIL} by Prosperity Pub 101 Marketside Ave, Suite 404 PMB 318, Ponte Vedra, Florida 32081, United States [Prosperity Pub]( [] ABOUT US: We believe that the opportunity for financial literacy and freedom belongs to all people, not just those who already have years of investing experience. Prosperity Pub provides an array of educational services and products that will help you navigate the markets and become a better investor. Trading is made simple through our online forum full of trading techniques to give you the best tools to kick-start your investing journey. We offer collaborative webinars and training; we love to teach. No matter the opportunity, we bring together a strong community of like-minded traders to focus on analyzing market news as it’s presented each day. DISCLAIMER: FOR INFORMATION PURPOSES ONLY. The materials presented from Prosperity Pub are for your informational purposes only. Neither Prosperity Pub nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational purposes intended is at the user’s own risk. DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. Prosperity Pub is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions. Please visit [( for our full Terms and Conditions. [Unsubscribe]( This email was sent to {EMAIL} by Prosperity Pub 101 Marketside Ave, Suite 404 PMB 318, Ponte Vedra, Florida 32081, United States [Prosperity Pub](