Our Insights

August 2019 – 3 in 3

August 2019 – 3 in 3

This month Jason Weaver discusses the bond sectors, consumer confidence and inverted yield curve.

Bond Sectors

There are various bond cycles. There are: US Government Bonds including treasury, TIPs and agency. Mortage bonds include Pass-Thru, CMO and ARMs. Credit bonds include US Corporate, Asset Backed, Convertible, Municipal and Inflation Protected. Non US bonds include International Corporation and International Government.

From one year to the next, the returns might be better or worse in each category. As you can see year to date, U.S Treasury Bonds are at 8.58%. Treasury Inflation Protection Securities (TIPs) were up 8.12%. U.S. Corporate Bonds and Convertible bonds are leading the pack so far year to date.

Consumer Confidence

Consumer confidence provides indication of the future of consumer spending. If you are above 100, that is a boost. Which means consumers will potentially be buying. Below 100 signals some pessimism in the consumer.

As you look at the second chart in the video, when you are over 100, it means the economy is doing very well. Today, consumer confidence is about 101 or so and it is doing very well.

Inverted Yield Curve

This occurs when short term bonds are higher than rate paid by long term bonds. You have probably heard this in the news recently, that this is a good predictor of a recession. The inverted yield curve has predicated 10 recessions and only 5 of them have occurred. Although every recession has an inverted yield curve, not every inverted yield curve leads to a recession.

We are currently inverted on the 2 to 10, just slightly. But again, we do not know what that holds for the future. If history shows, it may lead to a recession but typically that is 6-36 months out.



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July 2019 – 3 in 3 Market Update