At the macro level, the negative slope of the US Treasury yield curve, with two-year US government bonds offering yields to maturity higher than their ten-year counterparts, portends, according to economic historians, that the worst is yet to come, with recession just around the corner on the other side of the Atlantic.
To support the concern and the general insecurity of market participants, the leading stock index S&P-500 has been “stuck” below its 200-day moving average for five months. This is the longest negative streak since 2009 for the index. It was back then that the index bottomed out and a broad, long-term upward “wave” followed, with the help of borrowing rates at historically low levels. The index hit the highest intra-session level of all time in January this year.
At the level of individual S&P-500 stocks, market breadth is similarly weak, as demonstrated by the percentage of stocks trading above their own 200-day moving average.
In any case, inflation along with market volatility remain and the possibility of recession is lurking, especially as long as the geopolitical and interest rate “hard landing” continues.