debt

Random Thoughts on the Inverted Yield Curve and Debt

There was much discussion in 2018 on a temporary inversion of the two and ten year treasury yields, and it almost certainly contributed to some panic as investors widely view inversions in the yield curve as leading indicators of recession. Surprisingly for those who take the position that market timing isn’t possible (it probably is to some extent, but it would likely be difficult and unprofitable to act upon), investors have good reason to believe yield inversions are meaningful, as they have preceded all nine U.S. recessions in the past 60 years with recessions on average occurring 18 months later, with a high level of predictive power according to the San Francisco Fed.

U.S. Stock Market Valuations and Future Returns of the S&P 500

In 2013, Eugene Fama, Lars Hansen, and Robert Shiller won the Nobel Prize in Economics. It was an odd trio, given that Fama is one of the fathers of the efficient markets theory and Shiller wrote a book titled 'Irrational Exuberance' in which he discussed the irrationally high stock prices  shortly before the crash of 1999.