DBD Strategy Daily - The risk of rising yields at the end of the business cycle
We hear that the US economy is on the longest expansion cycle it has known in years. We do not share this view. This is the conclusion of those who set strict readings for the ups and downs of the business cycle. We focus on the rhythm of the cycle to identify its peaks and troughs. Some cycles are extremely strong, and their lowest level will correspond to a slow growth; whereas other cycles are very weak and even their peak may only match a modest growth. There is no question to us that the US business cycle has started decreasing in May 2018 and it will probably not bottom until October onwards. Our US yield cycle is supposed to end roughly now, but we do not know whether the low is really still ahead of us or whether it is already behind us. If yields keep rising as a consequence of this coming meeting, the scissor effect for Equities will be hard in the coming weeks. If Powell softens its stance and insists on following economic releases, not anticipating them, then US Equities stand a chance of extending their current rally.
DayByDay is an independent research company providing global macro and single stock analysis, recommendation and allocation based purely on behavioural finance methods. Those include long term cycle analysis, sentiment analysis, and technical trigger. DayByDay serves all clients in need of practical and precise publications to make effective market decisions, on any time horizon, from a few hours to a few years.
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