There should not be a sense of relief after the Yield Curve has normalized because historically recessions occur after about 1 year after this process reverses
Courtesy northmantrader.com – $VTI Vanguard Total Stock Market ETF

 

Actual economic data in the US is declining.  We are putting it on the back burner, instead choosing to focus on a hopeful Trade Deal celebration first – which is increasingly looking unlikely to happen after the passage of the Hong Kong Human Rights and Democracy Act.  And in the even nearer term, we are hopeful of the US Consumer against a Holiday Season backdrop.

But the Piper will be paid. 

Europe is showing signs of bottoming with the DAX, the CAC, the FTSE and others all making big moves higher in the last year. 

As their rates rise, ours are falling and our stock market will follow. 

We may be at the top already, a considerable amount of bad news is mounting.  We may get good news about the Trade Deal, which will likely be “Business as Usual” in Paul Tudor Jones’s words.  In relation to the monetary policy of the US, the billions of dollars being deliberated in this trade deal is “nothing” (again, Paul Todor Jone’s words, not mine).

We also have The Economic Cycle Research Institute co-founder coming out yesterday, saying that we cannot remove recession fears from the table while reminding us that markets hit all-time highs just before the 1990 recession and in 2001 after the recession started.

Same story in 2008.  But in a basic sense, the stock market is a forward looking market.  What we have ahead is a possible trade deal that is baked in or worse, lower profit and lower growth.   There are a lot of different players and it takes time for a consensus to build, especially on the downside.

The bad news is mounting and the forward looking mechanism will see it shortly.  I bet (with stops of course) we will all see this within the next few quarters.