Market Pulse: The dog days? |

Market Pulse: The dog days?

David Vomund
Market Pulse
David Vomund

So much for what used to be called the dog days of summer — usually a quiet time for stocks as investors vacation. Not this year.

These last two weeks we’ve seen the Dow move 400, 600 and even 800 points. On some days the move was news driven, usually about prospects for trade and tariffs. Briefly the media were over the top about the “inversion” of the yield curve and what that could mean about a recession later.

A few words:

For starters, the yield curve from the 90-day bill to the 30-year bond was not inverted nor close to becoming so. However, the yield on the two-year Treasury edged one basis point above that on the 10-year note. One basis point? And that was short-lived.

Why the focus on the partial inversion?

On the four occasions when the yield on the two-year Treasury topped that on the 10-year note a recession followed (on average 18 months later). Not mentioned was that in two of those cases the Fed was raising interest rates and making a recession more likely or even the goal. They are doing just the opposite now.

That leaves two others over 40 years. I wouldn’t draw any sweeping conclusions based on two cases of anything in financial history. While the media ran with their inversion story, I find it hard to believe that individual investors and most professionals are making any decisions based on what might or might not happen 18 months from now. A lot could and will happen along the way.

The brief inversion aside, if you are a worrier there is plenty on your plate. Unrest in Hong Kong, riots in Moscow, the strong prospect of a default by Argentina, falling commodity prices, Iran, negative yields on $16 trillion of government debt, Brexit, weak economies in Europe, prospects for a global recession, falling earnings and tariffs.

Investors have become almost manic depressive. Hardly the emotions that usually occur near market tops.

Every day is an adventure, it seems, and a challenge. It is always easy to become totally focused on the negative headlines. Easy and wrong if that distracts you in a bull market.

I have no strong feelings about where the economy will be 18 months from now and no one should given all the variables and unknowns. But we know what we know. The economy is in solid shape, productivity is rising, people are working and earning more, and consumers are spending (Wal-Mart’s and Target’s sales and earnings reports confirmed it).

Times are good.

David Vomund is an Incline Village-based fee-only money manager. Information is found at or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial advisor before purchasing any security.

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