Via Bloomberg
German yields have dropped below zero and the US yield curve has inverted. The catalyst for these declines was the very weak PMI data out of Germany last Friday and out of the US. It was a gloomy Friday.
This Bloomberg article I read made a case for this turn of events to work out as a bullish signal for stocks. Here was the reasoning:
With US growth close to 2% in 2019 the Ex-Fed chair Yellen said that doesn't signal a recession. Therefore, the inverted yield curve is a bullish signal for bonds and equities. Why, I hear you ask? Because we are set to remain within our present context i.e a quiet inflationary world where global easing is part of the everyday landscape. Need some more cash? Well, just turn the computer on. Think of QE and how it buoyed the stock markets.
Impact of QE on the inverted US yield curve
I like this article because it tries to address what the impact QE has on the inverting US yield curve. A question I have been toying over in my mind. It also makes sense with a straightforward logic. If QE is brought back in to address a slowing economy, it is likely to have the same effect. It is going to be interesting how this plays out. What about you ForexLive readers? I know we have some canny traders here. so what impact do you think QE will have on an inverting US yield curve, if any?
