No one really knows for sure!
Just like we weren’t certain what caused a hissy fit the last quarter of 2018, no one really knows for sure why everyone became so happy this quarter. Needless to say, we think this is a more normal reaction and possibly a reversion to the mean from the hissy fit.
As mentioned in our Q2 2019 Newsletter, capital markets could have been protesting higher interest rates – or as mentioned in one of our most read posts at Street-cents.com, it could have just been that it was amateur hour and movement during a “Gentleman’s agreement no movement” time was exaggerated. No matter the reason, capital markets have a happier face.
Inverted yield curve
Just as we pushed the Q2 Newsletter off to the presses, the yield curve did officially invert – as a reminder, yield curve inversion is when short term interest rates are higher than long term rates, which occurred in the last five days of the quarter. The reason we, as well as many other in the industry crow about this unique situation, is it has been a precursor to recessions with great accuracy. Before taking shelter and hiding under the covers, this precursor has no accuracy on the depth, and very little accuracy on the timing of a recession. In some instances a recession occurred two years after the inversion.
Recession Definition
As mentioned again in our Q2 Newsletter, the definition of a recession is two consecutive negative gross domestic production – GDP prints – yes that could be – .01% and -.01% making for a mini-mi recession, but still a recession. No matter, just as you can’t be partially sick or partially have an accident the inverted yield curve did occur. As such we will be monitoring the situation very carefully and remembering that now, is not the time to be taking extra risk.
Interest Rates
Given the yield curve inverted, no steep inflation signals are occurring, and the economy is growing, but not red hot, it is likely we have seen the highest short term rates for a while. Fed officials seem very comfortable at the current level. As more data is recorded, things can change.
We will talk to you again in the summer, have a great day!
John A. Kvale CFA, CFP
Q 2 2019 Newsletter Video Audio Podcast Review By John Kvale
Welcome to our Video and Audio Podcast Review of our Q 2 2019 Newsletter. For those on the road or just unable to grab the time to read, our podcast type review gives you the behind the scenes insight to our thoughts, observations and deep views of the entire Newsletter.
Click Here for direct link to an electronic version (an early peek-good ole fashion paper versions are on their way to you shortly) and here for our Newsletter page
Let’s get going!
Q 2 2019 Newsletter
And here is your review!
Capital Market Talk
Recession and the Inverted Yield Curve
Ask any long distant runner what happens when they start out too fast and they will tell you it is not good new – The saying goes for every minute you go out too fast, you come back two minutes slower than normal…
In our main capital market article we discuss the reasons why we may have a recession by definition, but why it may not be a big deal (hopefully).
The Inverted Yield Curve (Short term interest rates higher than long term rates) and infrequent event, did occur for five days – so far – just after our Newsletter went to the publisher. The Inversion has been a good signal of recession, EVENTUALLY – some times as long as two years in advance.
They Don’t Want Your old 401k
A recent Cerulli study finds that once you leave the company, most really do not want your funds anymore. We have long suspected this.
Are a few items we have run into over the years!
Iron Clad Trustee
General order of Trustee or other important people to execute your wishes when you are incapacitated or deceased, generally go like this:
As we can all imagine, this list can easily be very short and insufficient.
In our deep dive of the Institutional Trustee Services, we discuss the handiness of having such a great service as well as the ability to offer these services ourselves.
Choose Your Beneficiaries Carefully
In this article that fit nicely with our Trustee article we mention different types of Beneficiaries and most importantly. Make sure you confirm that your beneficiaries are correct as this will over ride you other documents, including a Will or Trust.
We hope you enjoy … talk to you in the Summer!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
www.street-cents.com
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Posted in Audio, FOMC, General Financial Planning, Interest Rates, Investing/Financial Planning, Market Comments, Newsletters, Vault, Video
Tagged 401k, Beneficiary, Cerulli, Inverted Yield Curve