{"id":8180,"date":"2019-08-19T20:58:11","date_gmt":"2019-08-19T20:58:11","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=8180"},"modified":"2022-02-26T13:07:13","modified_gmt":"2022-02-26T13:07:13","slug":"inverted-yields-nothing-new-chinese-tariffs-delayed-and-more","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/inverted-yields-nothing-new-chinese-tariffs-delayed-and-more\/","title":{"rendered":"Inverted yields nothing new, Chinese tariffs delayed, and more"},"content":{"rendered":"\n

Let\u2019s Talk About\nYields \u2013 <\/strong>Financial newswires are saturated with stories about how the bond\nmarkets \u2013 via an inverted yield curve \u2013 are sending recessionary signals. It\ndidn\u2019t help matters when the stock market sold off sharply early in the week,\ntriggered by the 2-year U.S. Treasury yield ticking above the 10-year U.S.\nTreasury yield. Since historically an inverted yield curve has been a reliable\npredictor of recessions, this event spooked the markets and led to pronounced\ndownside volatility. But there are a couple of key historical insights to\nconsider. First, since 1978 the market has actually rallied <\/em>by an average of +13% from the time a yield curve\nfirst inverts to the beginning of a recession. That\u2019s because historically, a\nyield curve inversion itself has not actually corresponded perfectly with a\nrecession. The recession tends to come several months or even years later. Second,\ntechnically speaking the yield curve has been inverted for months. The Federal\nReserve\u2019s preferred measure of the yield curve (10-year yield minus 3-month\nyield) has been inverted since May.1<\/sup> To us, the new development of the\n2-year ticking higher than the 10-year is a signal of investors reacting\nfearfully to an old story, which in our experience characterizes market\ncorrections, not bear markets.  <\/p>\n\n\n\n

When it Comes to\nYields, Stocks are Arguably More Attractive than Bonds \u2013 <\/strong>Across the world,\nthere is approximately $15 trillion in government debt with a negative yield,\nmuch of which comes from developed countries with historically strong\neconomies: Germany, Sweden, Japan, and more. In this scenario, investors are actually paying money <\/em>to park their\nassets in developed country bonds. Fears are growing that the U.S. is headed in\na similar direction, with historically low interest rates and a Fed poised to\nlower them further. Time will tell, but it is worth considering that with the\ncurrent state of low interest rates globally, nearly 60% of S&P 500 stocks\npay a higher dividend than the current yield on the 10-year U.S. Treasury.2\n<\/sup> <\/p>\n\n\n\n

___________________________________________________________________________<\/p>\n\n\n\n

Set Yourself Up for Long-Term Investing Success<\/a><\/strong><\/p>\n\n\n\n

Investing is emotional especially when volatility comes into\nplay. A bull market can be as exhilarating as a bear market is terrifying (ask\nany investor who went through 2008). But in our view staying invested is key –\nsince 1926, investors who remained in the market over the long-term came out\nahead 99% of the time.3<\/sup><\/p>\n\n\n\n

It\u2019s important to maintain perspective during rough periods\nso you don\u2019t overreact. If you have $500,000 or more to invest, get our free\nguide, How to Avoid Emotional Investing<\/em>. It provides our advice, based\non decades of experience, to help you navigate through turbulent times.<\/p>\n\n\n\n

Download Our Guide, <\/a>How to Avoid Emotional Investing<\/a><\/em>.<\/a>4<\/a><\/sup><\/strong><\/p>\n\n\n\n

___________________________________________________________________________<\/p>\n\n\n\n

Tariffs Delayed, But Not Gone \u2013 <\/strong>The equity markets got brief <\/em>respite from volatility this week, when the Trump administration\ndelayed tariffs on $300 billion of mostly consumer goods imported from China. The\n10% of additional tariffs, originally set to go into effect on September 1,\nwill target products like smartphones, laptops, toys, and videogames \u2013 all\nstaples of the holiday shopping season for American consumers. These tariffs\nare now set to go into effect on December 15, which will give retailers the\nopportunity to build inventories for holiday season without incurring the\nadditional tax.5 <\/sup><\/p>\n\n\n\n

Americans Have More Mortgage Debt Than\nEver \u2013 <\/strong>If there\u2019s an upside\nto low interest rates across the globe and here in the U.S., it\u2019s that\nborrowers can take advantage of low financing costs to purchase homes or\nperhaps re-model existing ones with additional mortgages. Problem is, recent\nhistory suggests that over-borrowing in the mortgage market can lead to\nimbalances that can have negative consequences if a recession hits. At the end\nof the second quarter, mortgage balances stood at $9.406 trillion, which is a\nhigher mark than the $9.294 trillion of outstanding mortgages reached in Q3 of\n2008. A recent rule passed by the Trump administration may make borrowing\neasier as well, with Fannie Mae and Freddie Mac now being required to consider\nother measures besides FICO scores when determining credit-worthiness.6<\/sup><\/p>\n\n\n\n

No matter how these stories\nunfold, it is impossible to control the highs and lows of market. But there are\nways you can manage the highs and lows of your own emotions and stay focused on\nyour long-term goals. <\/p>\n\n\n\n

In our view, staying invested is key – since 1926, investors who remained in the market over the long-term\ncame out ahead 99% of the time.7<\/sup><\/strong><\/strong><\/p>\n\n\n\n

If you have $500,000 or more to\ninvest, get our free guide, How To Avoid\nEmotional Investing<\/em>.8<\/sup> It provides our advice, based on decades\nof experience, to help you navigate through turbulent times.<\/p>\n","protected":false},"excerpt":{"rendered":"

Inversion could signal correction (not recession), stock yields vs. bonds, mortgage debt at all-time high. <\/p>\n","protected":false},"author":3,"featured_media":7426,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-8180","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8180","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=8180"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8180\/revisions"}],"predecessor-version":[{"id":10723,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8180\/revisions\/10723"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=8180"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=8180"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=8180"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}