Fear is Often a Greedy Thing
The Dividend Cafe
The Dividend Cafe - The Bahnsen Group
4.9 • 572 Ratings
🗓️ 17 May 2024
⏱️ 21 minutes
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Summary
Today's Post - https://bahnsen.co/3QOLsna
The second quarter of 2024 hit its midpoint this week, and markets have continued with what has been a big rally in the month of May. As earnings season has now concluded and the Fed is sidelined for a bit, we might expect things to chill out for a bit, but markets never sleep, so who knows. But this week’s Dividend Cafe does give you a pretty good look at the yield curve and what it predicts (or doesn’t), along with a cogent expectation for inflation, some fascinating things Japan can teach us (or not), some campaign questions for Team Biden, and then ultimately – a real behavioral lesson that may just make or break your success as an investor.
So yes, the opportunity inside this week’s Dividend Cafe is serious. Let’s jump in!
Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com
Transcript
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| 0:00.0 | Welcome to the Dividend Cafe weekly market commentary focused on dividends in your portfolio and dividends |
| 0:07.7 | in your understanding of economic life. Well, hello and welcome to another episode of Dividend Cafe. I am recording |
| 0:18.6 | this week live from our Newport Beach office studio and going to go through a few things today, |
| 0:26.1 | just covering a couple of different subjects of market interest and then conclude with kind of a longer and broader point that I think is a very helpful takeaway. |
| 0:37.2 | Just in terms of the lay of the land, |
| 0:40.0 | the market momentum and positivity that has been the case here in the month of May |
| 0:45.4 | continued for the most part this week and the beat goes on. I wanted to talk about the yield |
| 0:52.4 | curve for a second. I think it is a fascinating development that the yield curve has now been inverted for over 675 days. |
| 1:06.5 | And no recession has followed and no recession is really forecasted or predicted right now in any kind of reasonable definition of the immediate future. |
| 1:18.2 | And the reason I bring that up is I think we're going to have a conversation about whether or not an inverted yield curve has lost its predictive prowess or not. |
| 1:30.3 | I think it's a tiny bit disingenuous when people will say, well, you know, it inverted in 2018 |
| 1:37.4 | and we got that recession in 2020, it did slightly invert at certain points of the curve. |
| 1:45.5 | And what we mean by this, of course, is that the yield for some shorter duration instrument, whether it's a 90-day or two-year, |
| 1:51.5 | goes higher than the yield for a longer maturity, such as a 10-year. And so technically, |
| 1:59.0 | if the three-year is higher than the the five year, there's an inversion, |
| 2:03.2 | and if the two year is higher than the 10 year, that's an inversion. But the more classic |
| 2:08.5 | inversions, what we refer to, have to do with a 210 or a 90-day 10. And the notion that the yield curve inverted in 2018 because it was predicting the few |
| 2:22.4 | month recession from a COVID lockdown in 2020 is obviously assinine. I would argue that we've now |
| 2:30.5 | had two yield curve inversion periods that did not result in an economic recession. |
| 2:37.2 | The COVID recession, obviously being outside the normalcy of economic activity. |
| 2:43.8 | And in fact, the 2019 economic activity was quite positive despite the inversion in 2018. So there's a couple things that can happen. |
| 2:54.1 | You're going to have a recession at some point. And let's say it's in six months. Let's say it's |
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