Finally our conclusion to what we have all been waiting for …. The Predictive Value of our discussion …
So we know the FOMC fiddles with rates…
The FOMC Federal Open Market Committee raising the totally controlled short end … recall, they do not totally control the longer end… capital market participants do!
This following Chart is our sizzle….
This is the difference of the 2 year yield and the 10 year yield for about 5-6 decades…
When the 2 year yield is BELOW the 10 year yield the line is plotted above zero … think 1% less 3%, would give you a data point of 2 on this chart….
When the short end of the curve is ABOVE the long end — totally backwards to all logic, the plot on the graph would be BELOW zero… areas which we have circled in red…
Grey area are recessions …. just behind the inversions —
Take a moment and check this chart out…
Here is an easier to see chart from 1999 to present–
Why don’t they stop raising?
They cannot, it is their mandate – keep inflation under control …. raising rates is their main control mechanism.
Also, it is beyond their control as investors actually pile into the long end of the curve dropping it’s rate while the FOMC raises, in anticipation of the next recession…
Creating the Inverted Yield Curve!
In Never go all in or All out fashion, if the curve inverts we do not pack up our things and leave …. BUT caution is definitely advised.
There will be excuses …
- it’s different this time …
- rates are un-natural …
- rates are low …
Maybe- worth heeding with a track record shown above….
We will keep you posted!
Hope you enjoyed the Series … Quick links – Part 1, Part 2, Part 3, Part 4
Have a Great “Not Inverted Yield Curve” Day!
John A. Kvale CFA, CFP
May 2018 Podcast Video, Financial Planning and Capital Market Update – By John Kvale
Hello and Welcome to our May 2018 Financial Planning and Capital Market Update!
If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast format.
May 2018 Video
Financial Planning Tip (s) –
Social Security Website and Items to check while you are perusing
In our Social Security related post here, we discuss the tons of new options for use as well as the fantastic updates the Social Security Administration has done with their website.
The most important item to check if you are not already drawing Social Security is your credits… which can be done on this site… recall there is a possible time sunset of loosing your benefits if you do not have the Social Security Office notified, leading to a possible lower benefit.
New Tax Table and Rates – Personal
Here are the new tax tables… if they look complicated, well it is because they ARE !
Expect much more on this throughout the coming months as we dig DEEP into the actual rates and the planning techniques necessary to optimize our tax liability …. One Important five letter word…. CLUMP – more later on this!
Capital Market Comments
Interest Rate Yield Curve – Rates – Inverted Yield Curve
Bottom line, at its most basic level the yield curve should go upward and outward just as our home made chart below (the starting point for our discussion.)
When it does completely the opposite or inverts, as seen below… a recession is just around the corner for as long as the eye can see!
Expect a complete detailed video over the summer on this phenomenon … along with another review in the coming Newsletter… It can be boring info, not to worry … we will liven it up!
Have a Great Day – Talk to you at the end of June!
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
Share this:
Like this:
Leave a comment
Posted in General Financial Planning, Interest Rates, Investing/Financial Planning, Market Comments, Monthly Review, Podcast, Social Security, Tax Related, Video
Tagged Inverted Yield Curve, Social Security, Tax Table, Yield Curve