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Two Yield Spreads Are Better Than One For Business Cycle Analysis

Published Fri, 07 Jun 2019 08:16:44 -0400 on Seeking Alpha

The US recession warnings are flying every which way lately in the wake of an inverted yield curve. The spread on the 10-year less 3-month yields, in particular, has unleashed a wave of predictions that a new downturn is near. But some analysts point out that another widely followed spread - 10-year less 2-year yields - is still positive, albeit modestly so. What's an informed investor to do? Wait for both spreads to confirm a recession forecast before betting the farm on contraction.
To be clear, The Capital Spectator recommends looking beyond yield curves in search of reliable, timely signals on US recessions. On that basis, recent data indicate that an NBER-defined downturn hasn't started and isn't likely to start in the immediate future, as discussed in last month's profile of business cycle risk. (For a more comprehensive review of the macro trend with weekly updates, see The US Business Cycle Risk Report.)
The Treasury yield curve is part of the mix for evaluating the business cycle, but relying on it in isolation, despite an encouraging track record, is ill-advised. Why? Because any single indicator is prone to false signals, even if history suggests otherwise. Economies evolve and investors adapt to history's lessons, which implies that nothing is written in stone when it comes to reading the tea leaves of the business cycle through time. Reviewing a broad data set can help minimize the risk of being led astray with an overly narrow focus on the economic and financial... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
CORNERSTONE TOTAL RETURN FUND 11.05   0.0 0.00 2.48 22.40
ZWEIG FUND 10.86   0.0 0.00 1.44 13.43
LIBERTY ALL STAR EQUITY FUND 6.17   0.0 0.00 0.65 10.62
SPDR DOW JONES INDUSTRIAL AVERAGE ETF TRUST 262.56   0.0 0.00 5.67 2.18
PROSHARES ULTRAPRO SHORT S&P 500 27.77   0.0 0.00 0.00 2.13
SPDR S&P 500 ETF 292.36   0.0 0.00 5.42 1.87
PROSHARES ULTRASHORT S&P 500 30.82   0.0 0.00 0.00 1.86
POWERSHARES QQQ TRUST SERIES 1 182.07   0.0 0.00 1.49 0.79

CORNERSTONE TOTAL RETURN FUND - CRF
CORNERSTONE TOTAL RETURN FUND - CRF  


Older articles featuring Cornerstone Total Return Fund (CRF):
Pay Attention To The Message The Yield Curve Is Sending
Negative-Yielding Debt: Monetary Contagion Spreads
The Dollar, High-Yield Bond Market And S&P 500 Revenue Growth
Equity CEFs: Where's The Beef In The Delaware Dividend & Income Fund?
Of Slopes And Flops: The Yield Curve Inversion
When A Yield Curve Inversion Means Recession
Ignore The Yield Curve, They Said...
Is The U.S. Yield Curve Signaling A U.S. Recession?
Short And Sharp: Yield Curve Inversion - A False Positive?
Weekly Edge: Yield Curve Sends Mixed Signals

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