Short comment
Western equities plunged out of nowhere at this Friday. S&P500 -1.90%, NASDAQ -2.50%, Eurostoxx50 -1.83% were recorded, driving safe assets to the heaven. Asian equity indices futures including HangSeng, NIKKEI225 and KOSPI200 were announcing coming disaster in coming Monday.
One of the points from the plunge is the yield curve. Yield spread between yields of 2year and 10year US Treasuries is still positive, but other long-short spreads are entering negative range. If the plunge continue for a while, negative spread between the 2Y and 10Y could come up eventually much earlier than expected.
As some big-shots like Ben Bernanke, Janet Yellen or Jamie Dimon have insisted that the negative spread is not to mean for a signal of disaster this time, FI market situation is different from the old days. However, some signals of the burst of the market are appearing, like reeling real estates in global main cities, increase of the companies which have amassed full debts or concerned Chinese hard-landing. With the signals, the negative spread is still accepted as a signal for the disaster.
Western equities plunged out of nowhere at this Friday. S&P500 -1.90%, NASDAQ -2.50%, Eurostoxx50 -1.83% were recorded, driving safe assets to the heaven. Asian equity indices futures including HangSeng, NIKKEI225 and KOSPI200 were announcing coming disaster in coming Monday.
One of the points from the plunge is the yield curve. Yield spread between yields of 2year and 10year US Treasuries is still positive, but other long-short spreads are entering negative range. If the plunge continue for a while, negative spread between the 2Y and 10Y could come up eventually much earlier than expected.
As some big-shots like Ben Bernanke, Janet Yellen or Jamie Dimon have insisted that the negative spread is not to mean for a signal of disaster this time, FI market situation is different from the old days. However, some signals of the burst of the market are appearing, like reeling real estates in global main cities, increase of the companies which have amassed full debts or concerned Chinese hard-landing. With the signals, the negative spread is still accepted as a signal for the disaster.
The plunge in the stock market could be continued for a while, but real plunge is still too early to come up. I have suggested that the liquidity in the market are too full to leave the market to go through the hell. My thought about the liquidity does not change at all. Macroeconomic indices and corporate earnings are going down, but still good in objective perspective.
The last time to enjoy "buy the dip and sell the rally" is coming smoothly and the realization of the plunge could come up in between six months and a year according to traditional timeline about the yield curve. However, it will not come to the real before S&P500 touching 3,000. The market has recovered its plunge continuously, and still has the resilience from the liquidity and supportive macroeconomic indices.
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