The present declining yields indicates big economic woes ahead. Despite the Fed’s recent rate cut to stabilize the economy, yields are plunging instead of going up. And that’s very bad news for the economy and the stock market. Only two times in recent history – just before the crash of 1987 and the great financial crisis of 2008—have yields plunged as much as now. The chart below shows plunging yields and Fed cuts followed by big drops in the S&P 500 in 1987 and 2008. In fact, this is yet another of a number of warning signs we’ve published in recent charts of the week that there’s big economic troubles ahead. They include the fact that globally negative yields of the safest sovereign bonds are at record highs and that manufacturing is falling around the globe. See helpful piece on bond investing.
The chart above was created by macro analyst Otavio (Tavo) Costa.