Autor Tema: PPCC: Pisitófilos Creditófagos. Primavera 2024 (Leído 107207 veces)

Yield Curve Inversion Signals Recession in H2 2024

2024.04.24

H2 2024 Recession Signal

The relationship between the yield curve and economic downturns is a subject that has piqued the interest of both investors and economists for decades. It’s an intricate topic that calls for a deep-dive exploration to fully comprehend its impact and implications. Therefore, in this comprehensive article, we will meticulously explore the historical patterns of yield curve inversions and analyze their potential implications for the performance of the stock market.

By examining the empirical data and taking into account various economic factors, we can strive to gain a more comprehensive understanding of the yield curve’s significance. We aim to discern how this financial phenomenon influences market performance and the broader economic landscape. While it’s important to note that past performance is not necessarily indicative of future results, a careful and in-depth analysis of historical data can provide valuable insights for investors. These insights can serve as a guide, helping to navigate the often turbulent waters of financial markets.

What is the Yield Curve?

To understand the significance of yield curve inversions, it’s important to first grasp the concept of the yield curve itself. The yield curve is a graphical representation of the interest rates on debt for a range of maturities. It shows the relationship between the interest rate (or cost of borrowing) and the time to maturity of the debt. Typically, a yield curve is upward sloping, indicating that longer-term debt carries a higher interest rate than shorter-term debt, which makes sense as it’s riskier to lend money for a longer time as opposed to a shorter time. This normal yield curve reflects the expectation that investors demand higher compensation for the added risk and uncertainty associated with holding longer-term debt.

However, there are instances when the yield curve inverts, meaning that short-term interest rates are higher than long-term interest rates. This inversion occurs when investors anticipate economic weakness often as a result of tight monetary policy due to high inflation. In other words, an inverted yield curve indicates that investors have a pessimistic outlook on the economy, which is often seen by a recession that follows an inversion based on historical data.

Lessons from History

The current prolonged inversion of the yield curve, exceeding a year and a half, has led some to question its significance in the absence of negative economic indicators. While it is true that the economy has performed well during this period, it is crucial to examine historical precedents for a broader perspective.

Examining historical instances of yield curve inversions can shed light on the relationship between these inversions and subsequent economic downturns. Let’s take a closer look at some notable examples:

The Great Depression of 1929-1939:

The Great Depression, one of the most profound and impactful economic downturns in human history, was forewarned by a significant and notable yield curve inversion. In the month of February in the year 1928, the yield curve underwent an inversion. This inversion was not just a fleeting event, but it persisted for an extended period of over 600 days, which was unprecedented. This was a time of paradox, where on one hand, the economy was booming with record-breaking stock market highs, and on the other hand, the specter of the inversion loomed. This was an era when unemployment rates were at their historical lows, which gave a sense of economic stability and prosperity. However, this façade of prosperity was shattered when, following this extended inversion, the economy spiraled down into a severe and prolonged period of depression. This depression was not just a recession, but a major economic event that affected millions of lives and lasted for a significant period of time.

The Global Financial Crisis of 2008-2009:

Another significant instance that cannot be overlooked is the yield curve inversion that occurred in the period extending from 2006 to 2007. This event is of particular importance as it was a precursor to the global financial crisis that left a lasting impact on economies worldwide. During this critical period, the yield curve persisted in its inverted state for approximately 530 days, an unusually extended duration that was viewed with increasing concern by economists.

At first glance, the economy appeared robust during this period. The stock market was experiencing a significant upswing, with values soaring to impressive heights. Unemployment rates were also at a low, painting a picture of a thriving, dynamic economy. Yet beneath this veneer of economic strength, the prolonged inversion of the yield curve was a brewing sign of impending financial upheaval.

In the end, this seemingly unimportant inversion led to one of the most severe economic downturns in recent history, rivaling the severity of the Great Depression. This underscores the potential severity of such economic indicators and not overlooking the lag that yield curve inversions often come with for anticipating recessions.

The Recession of 1990-1991:

In the year 1989, there was a significant economic event – the yield curve inverted. This inversion, however, did not persist for a long period; it lasted for approximately 175 days. Despite its relatively short duration, this inversion set the stage for a sequence of events that led to a subsequent recession in the following year, 1990. It is important to note that this recession, although triggered by the inversion, was comparatively milder in its severity. This is especially true when its impact is measured in terms of the overall economy and the performance of financial markets.

Relationship Between Inversion and Economic Weakness

When we delve into the analysis of historical economic data, we can discern an interesting and notable pattern: the longer the yield curve stays in an inverted state, the more severe the resulting economic downturn tends to become. This is an observation that holds true across a variety of economic landscapes and timelines. The converse is also true; shorter periods of inversion often tend to be associated with shallower recessions and less severe bear markets. This is an important correlation to note as it provides a lens through which we can predict and understand the potential severity of economic downturns. This pattern suggests a tendency of an inverted yield curve to gradually weaken the economic structure over time, therefore making it even more susceptible to external shocks. These shocks can come in the form of policy changes, global events, or other unforeseen circumstances, which can trigger a recession.

Potential Triggers

Yield curve inversions, while providing valuable insights and signals about the overall health of the economy, should not be misconstrued as direct causes of economic recessions. Instead, they function more as a barometer, indicating potential vulnerabilities or weaknesses within the economic system that could, under certain circumstances, lead to a recession.

Historically, it has often been the case that external shocks, rather than the yield curve inversions themselves, have triggered recessions. Take, for example, the role that spikes in oil prices played in past recessions. These price shocks significantly contributed to the economic downturns that followed yield curve inversions in 2007, 2001, throughout the 1980s, and during the 1970s. It’s worth noting, however, that the recession in 2020, which was triggered by the global COVID-19 pandemic, stands as an exception to this pattern.

Additionally, market crashes can also serve as triggers for economic recessions, acting as catalysts that precipitate a broader economic downturn. One of the most notable examples of this is the Black Tuesday crash of 1929. This devastating market crash not only signaled the start of the Great Depression but also highlighted the inherent fragility and vulnerability of the economy at that time.

Market Melt-Ups

Taking a closer look at past occurrences of market melt-ups, which are typically defined by a swift and significant rise in stock prices, can offer valuable insights into the possible repercussions for the contemporary market environment. These phenomena of market melt-ups represent periods of intense speculation and investor optimism that can lead to unsustainable increases in asset prices, often followed by a sharp reversal.

Two particularly noteworthy examples of such instances are the melt-ups that transpired in the years 1987 and 1929. Both of these periods in history are marked by extraordinary market activity that offers a blueprint for potential future scenarios. In 1987, the market experienced a rapid acceleration in stock prices which culminated in a severe market crash in October of that year. Similarly, the 1929 melt-up led to the most devastating stock market crash in the history of the United States, ushering in the Great Depression.

If the current stock market were to undergo a blowoff top similar to these historical episodes, the implications could be quite concerning. This is especially true considering the ongoing yield curve inversion, a situation where long-term debt instruments have a lower yield than short-term debt instruments. This economic phenomenon has been comparable to the period leading up to the 2008 recession, a time of significant economic downturn globally. Therefore, if history were to repeat itself with a similar market meltdown, the economic fallout could be substantial.

Longer Inversions = More Weakness

Upon plotting the number of inverted days on the yield curve against the subsequent stock market drawdowns, we can observe a discernible correlation between the duration of the inversion and the severity of the market decline. This suggests that the extent of the inversion period may be a significant indicator of the potential market downturn.

Notably, episodes with extended periods of inversion, such as those that were observed preceding major economic downturns like the Great Depression and the Global Financial Crisis, were invariably followed by significant stock market crashes. These periods were also characterized by the endurance of prolonged bear markets, indicating a sustained period of generally falling stock prices.

Conversely, shorter periods of inversion, such as the one witnessed in 1990, have been associated with relatively milder market declines. This perhaps signals that the short length of the inversion period could be indicative of a less severe market downswing. Thus, understanding the duration of yield curve inversions can provide valuable insights into the potential trajectory of stock market movements.

Market Implications

Currently, the stock market is going higher, while the yield curve remains inverted. In 2019, for example, the yield curve inverted in June and the stock market continued to rise another 25% for 258 days before the significant peak in February 2019. In July 2006, the yield curve inverted and the stock market also rose another 25%, this time for over 600 days before the stock market peaked in October 2007. Rewind to 1989, and the stock market rose 29% following the yield curve inversion for 500 days.

The most exceptional example was in January of 1928, when the yield curve inverted and the stock market continued to rally by 98% until August of 1929, over the course of 2 years, before finally reaching its peak. This shows us that the stock market rally can continue despite the yield curve being an ominous signal for investors. However, after a certain lag time, the inversion typically does result in a recession.

In terms of how long that can go on, the maximum amount of time that the stock market rallied following an inversion was in 2007, which was a 657-day rally. If the market were to also rally for 657 days following the 2022 yield curve inversion, that would mean there’s another 146 days left, which would take us to August of 2024.

Conclusion

Yield curve inversions have historically been associated with economic downturns and stock market declines. Extended periods of inversion have often preceded severe recessions and bear markets, while shorter periods have been linked to milder downturns. However, it is important to consider that historical patterns are not foolproof indicators of future outcomes, and other factors can influence market performance. Investors should approach market analysis holistically, considering various economic indicators, geopolitical factors, and monetary policy actions. While yield curve inversions can serve as warning signals, they should be viewed in conjunction with other market data and trends.

Saludos.

tomasjos · « **Respuesta #1104 en:** Abril 24, 2024, 07:40:52 am »

Ahora llega la burbuja de trasteros

https://www.infobae.com/espana/2024/04/23/los-trasteros-se-convierten-en-la-inversion-estrella-del-pequeno-ahorrador-debido-a-su-bajo-precio-y-alta-rentabilidad/

Cadavre Exquis · « **Respuesta #1105 en:** Abril 24, 2024, 07:41:01 am »

https://twitter.com/HousingSpanish/status/1782812655830303133

Saludos.

tomasjos · « **Respuesta #1106 en:** Abril 24, 2024, 07:50:45 am »

¿Esta noticia tiene alguna relevancia?

https://www.elconfidencial.com/inmobiliario/residencial/2024-04-24/fondos-cataluna-division-horizontal-btr_3869955] [url]https://www.elconfidencial.com/inmobiliario/residencial/2024-04-24/fondos-cataluna-division-horizontal-btr_3869955[/url]

Cadavre Exquis · « **Respuesta #1107 en:** Abril 24, 2024, 07:52:13 am »

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Las hipotecas al 7%, así están en EEUU y puede ir a peor

Carlos López · 2024.04.23

Si en España nos quejamos de las subidas del Euríbor, en EEUU la situación empieza a ser preocupante. Las hipotecas fijas a 30 años superaron la semana pasada el umbral del 7% por primera vez este año, según indicó Freddie Mac en su informe semanal de ayer. Las tasas de hipoteca subieron del 6.88% al 7.10% en una semana semana.

Y la cosa podría empeorar ya que los mercados comienzan a apostar a que la Fed podría subir los tipos de interés (sí, subirlos). Los swaps apuntan a una posibilidad del 15% de que se produzca esta subida.

El ex secretario del Tesoro Larry Summers, dijo recientemente que: “Hay que tomarse en serio la posibilidad de que el próximo movimiento de tipos sea al alza y no a la baja”. El que fuera secretario del Tesoro con Bill Clinton dio una probabilidad de entre el 15% y el 25% a que esto suceda.

Durante un tiempo, los intereses de las hipoteca han estado cayendo porque la inflación parecía controlada pero este escenario cambió drásticamente, tras varios informes del índice de precios al consumo más altos de lo esperado.

De momento el que manda en la Reserva Federal, Jerome Powell se muestra duro aunque no parece contemplar subidas de tipos, pero tampoco bajadas: “ahora mismo, dado la fuerza del mercado laboral y el progreso en la inflación hasta ahora, es apropiado permitir que la política restrictiva tenga más tiempo para funcionar”. Powell afirmó que mantendría las tasas de interés donde están el tiempo que sea necesario.

Que las hipotecas estén al 7% no es un problema en sí, estaban al 18% en 1981. Pero en este ciclo de vivienda, las tasas de hipoteca subieron a estos niveles después de años de tasas históricamente bajas lo que provocó que los precios de las viviendas se hayan disparado, aumentando más del 50% desde el inicio de la pandemia. Con lo que ahora tenemos casa mucho más caras con hipotecas también más caras. Todo mal.

Y esa diferencia es la razón por la que la gente dejó de vender sus casas, y otros dejaron de comprar. El año pasado, las ventas de viviendas existentes cayeron a un mínimo de casi tres décadas debido al efecto de bloqueo. Los últimos datos disponibles muestran que las ventas de viviendas existentes también cayeron en marzo, tanto mensual como anualmente.

Una encuesta reciente desveló que casi el 80% de los vendedores potenciales se sienten atrapados en su hogar porque no quieren renunciar a su hipoteca actual (con menor interés que las nuevas) así que el mercado inmobiliario americano se encuentra en una situación muy delicada que podría explotar en el momento más inesperado.

Saludos.

Lem · « **Respuesta #1108 en:** Abril 24, 2024, 08:59:38 am »

Cita de: tomasjos en Abril 24, 2024, 07:40:52 am

Ahora llega la burbuja de trasteros
https://www.infobae.com/espana/2024/04/23/los-trasteros-se-convierten-en-la-inversion-estrella-del-pequeno-ahorrador-debido-a-su-bajo-precio-y-alta-rentabilidad/

A 3k € / m2 en BCN https://www.idealista.com/venta-trasteros/barcelona-barcelona/

En UK (que dan como ejemplo de mercado maduro) todo lo que queda cerca de ciudades son grandes empresas de self-storage o traslados y se corresponde a la foto que sale en la noticia, con temperatura estable, etc. También hay una versión más barata sin acceso libre para temporadas largas (6m +). Una de las razones obvias es que el precio del m2 probablemente hace que este modelo retail no sea rentable. No sé si hay también algún tipo de zoning que lo limite.

En uno de mis traslados, el anterior a este, dentro de Londres, me vi en la necesidad de usar uno durante un par de meses y es ruinoso. Pagué cerca de £600 / mes para un volumen equivalente a una Luton van (~ 20 m3).

Relacionado con esto, en UK el uso de trasteros está aumentando también:

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The self-storage boom: lifestyle choice or indictment of UK housing crisis?

Lock-ups are being reinvented and marketed as more than just storage amid overcrowding and record rent rises

Forget the gym membership and juicing regime: the new must-have to boost personal wellbeing is a self-storage unit.

At least, that is the call from a new company urging space-squeezed thirtysomething renters to accept that they cannot afford a home with enough cupboards in today’s housing system and instead sweep their clutter into a rented lock-up.

Hold, which is opening five storage sites in London, is trying to persuade householders that spending £270 a month on a lock-up is a lifestyle choice with the potential to “promote feelings of calm and relaxation” and even boost mental health.

The marketing gambit comes as figures show more than 100 storage complexes have opened in British towns and cities in the past three years, and that the sector now generates £1bn a year in revenue. Increasingly, the facilities offer communal areas, hot desking and creative studios to make them a more palatable extension of home.

But the Generation Rent campaign group has now warned that far from being a lifestyle choice that could boost wellbeing, the storage boom should be seen an “indictment of our housing crisis”.

“Self-storage warehouses sprouting everywhere … won’t come close to solving our problems,” said Ben Twomey, Generation Rent’s chief executive. “Homes are the foundations of our lives, so a storage container might be the perfect metaphor for how government inaction is leaving renters out of sight and out of mind.”

New self-storage space equivalent to more than three Canary Wharf towers – or about 6,000 two-bedroom flats – has been opened in the UK in the past year, according to an industry report from the real estate firm Cushman & Wakefield. The sight of storage complexes opening close to small newbuild flats is fast becoming one of the darker ironies of Britain’s struggle to supply enough housing.

This growth in storage sites is being driven by record rises in private rents and increasingly cramped housing; more than 500,000 rented households in England lived in officially overcrowded homes in 2022. The average UK rent increased by 9.2% in the past year, according to the latest figures from the Office for National Statistics, the equivalent of an extra £1,300 a year on the average rent in England.

Overcrowding often means children sharing bedrooms with adults, and sometimes beds with one another; more family arguments; teenagers struggling to do their homework; and damage to physical and mental health, a survey by the National Housing Federation found.

“People are living on top of each other and it’s fundamentally unhealthy,” said the founder of Hold, Frederic de Ryckman de Betz, who said he had previously found homeless people trying to live in units. “Separation is very important.”

Hold tells potential customers: “The system has let us down; leaving many of us feeling trapped as we get outpriced and squeezed out. It’s a fact: less space leads to a lower quality of life. How we feel about our personal and work space is deeply connected to our wellbeing. We all need more room to breathe, live, and grow.”

The location of Hold’s first branch, on a north London street that has been described as the “golden mile” of self-storage owing to the large number of new sites, embodies that system failure. It stands on the boundary of the boroughs of Camden and Islington, where average monthly rents are £2,672 and £2,384 respectively, about double the UK average.

A person from the Little Library stores some books at Hold in north London. Photograph: Graeme Robertson/The Guardian
On a visit to its first branch this week, the Guardian found Vincent, a professional drummer, practising in a soundproofed tiny unit because he cannot play in his flat. There was also a woman organising a charity library that had grown too large to store at home.

Hold’s approach appears to be to try to build on the decluttering movement pioneered by Marie Kondo, who argues that tidying up possessions can “reset your life”. It is also fitting hotdesk spaces, wifi and rentable music studios, as customers spend more time at the storage.

Renters at other complexes have previously told the Guardian they are using units as a workshop for a woodworking hobby, as a makeshift library, to run an eBay business, as well as for the standard stashing of surplus clothes and furniture. Some said they got a “punch” of satisfaction from seeing all their possessions in one place, while others said it enabled them to “live tiny” – in a van or even a car.

Despite the push to attract younger customers, most self-storage users are between 50 and 70 and often start because of a need to store inherited furniture and possessions after a family bereavement.

Philip Macauley, the head of self-storage at Cushman & Wakefield, said: “It’s still a middle-aged customer, but [operators] are trying to drive it to millennials. It’s the age-old London problem. Flats are getting smaller and with interest rate inflation you can’t afford a two-bed, you have to get a one-bed, and the flip side of that is [renting] self-storage.”

His report predicted “more lifestyle customers … long-term residential customers who genuinely use their self-storage unit as their room away from home, storing different items at different periods of their life”.

But self-storage is not the solution to the housing crisis, said Twomey. He called on the government to “build more homes, fund councils properly to crack down on landlords profiting from overcrowded rentals, and act to slam the brakes on soaring rents”.

tomasjos · « **Respuesta #1109 en:** Abril 24, 2024, 09:11:57 am »

Es que cada día las noticias en torno a la vivienda son más delirantes. Como si en vez de frenar acelerase el proceso de burbuja. ¿Esto no tiene fin?

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