Will China’s Flat Yield Curve Flatten Commodities?

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In the United States, one factor appears to do a better job of forecasting economic downturns than any other: the shape of the yield curve.  Over the past 40 years, there have been five sustained yield-curve inversions – when long-term interest rates are lower than short-term rates — and each one presaged a recession and a significant rise in unemployment (Figure 1).  The good news is that despite the Federal Reserve (Fed) raising interest rates four times since December 2015, the U.S. yield curve is nowhere near to signaling a recession.  Ten-year yields still exceed two-year yields by nearly 100 basis points (bps).  

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Could the Initiation of Trade Skirmishes Lead to Trade Wars?

The biggest current threat to global growth is a trade war.  There are other risks, too.  The U.S. Federal reserve is unwinding quantitative easing and raising rates, but is making the policy shifts very gradually, with careful market guidance.  Governments are focused on whether they need to cut taxes, not …

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Fed Unwinding of QE and What it Means for U.S. Bonds

What next for the U.S. bond market, where yields are outstripping those in Europe and Japan? Keep an eye on quantitative easing by the ECB and BoJ.

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Oil: Could Iran Risk Reverse Options’ Bearish Signal?

The removal of Secretary of State Rex Tillerson and replacing him with CIA Chief and former Congressman, Mike Pompeo, has implications for nearly all aspects of U.S. foreign policy, including Middle East relations.  More specifically, Tillerson supported the Iran nuclear deal (Joint Comprehensive Plan of Action or JCPOA), whereas Pompeo …