[Closed] Bond yield inversion.

Well, I moved to a job that depends on Europe or Worldwide clients and their activity, rather than UK. But on the other hand, I have no savings to speak of...

Bond yield inversion.

Is that the bit where they hang him upside down and get him to surrender before explaining their evil plans and aiming a laser at his knackers?

Just been reading about this on the FT, looks like we're in for interesting times.

Johnson's hard brexit plans could be the trigger for a EU wide recession..

Yep between brexit and Trump's tariff war they've stuffed us for the next 20 years or so. If only some of us had seen this coming and tried to stop it 🙄

Read about this today and now wondering if I should move the portion of my pension fund that’s in equities into something lower risk or just ride it out (I am only late 40s after all).

Wife’s company has been discussing it for a while, when it would happen and how certain of an indicator of a recession it would be this time....they didn’t expect it to happen so early. Should be an interesting first day back for her when we return from holiday.

Germany is probably already in recession.

Johnson’s hard brexit plans could be the trigger for a EU wide recession

https://ec.europa.eu/eurostat/web/products-eurostat-news/-/DDN-20170410-1

The UK is 16% of EU GDP

Eu exports to the UK are about 4% of EU GDP, maybe. Brexit isn't going to stop all of those exports (there really will be food riots if it does) so even with a hard brexit that creates a depression in the UK it's unlikely to create an EU wide recession without some help from:

Normal economic cycles - the current post 2008 period of growth and prosperity is the longest I've lived through and won't last forever, partly because:

Monetary easing and low interest rate monetary policy has its limits. When everyone solveable has borrowed as much money as they can (or want) the instrument is so blunt it wont cut butter. But it's still no brake and neither are:

The other things that often trigger a recession: high energy prices mainly, take a look at the oil price despite Iran tensions. The US is self sufficient thanks to fracking.

So we're left with a bit of strop over trade. I really don't see modest price hikes on Chinese stuff or Trump putting a tax on fine wines bringing the EU to its knees.

That said I'm hoping there might be a few buying opportunities as I consider most asset classes overpriced at the moment, and that really could be a problem. It doesn't take many people to think like me to knock 25% or more of stocks and that makes a lot of people feel poorer and less willing to spend and vicious circle.

So in conclusion it's not so much Brexit as yet another financial dip/correction/crash that will cause a recession in Europe.

It's just that a no deal Brexit will make Britain the hardest hit place this time around but it still hasn't happened yet.

So we’re left with a bit of strop over trade. I really don’t see modest price hikes on Chinese stuff or Trump putting a tax on fine wines bringing the EU to its knees

The economic slowdown in Asia will have and has had a knock on effect on us. It won’t be the sole root cause, but it will certainly be a contributory cause in a perfect storm of various factors.

Looking for a silver lining here, might now be a good time to invest in some sort of pension fund and reap the benefits of 20 years of recovery?

If you're going to invest you need to wait for the stocks to dive first; of course timing that properly would be like playing roulette and putting it all on 18 ie a stab in the dark....

The UK is 16% of EU GDP

etc etc

yes and no.

A Hard Brexit on its own no, but the EU economies are slowing, Germany is in recession and recessions are generally more about confidence than actual economics eg there is a school of thought that the inverted bond yield causes recessions because it persuades banks not to lend. Brexit, could just be a tipping point in confidence, which then ripples through the EU.

now wondering if I should move the portion of my pension fund that’s in equities

Wait for the dip, double down and wait for the recovery bounce. Those that held their nerve in 2008 did very, very well in the recovery

mefty

Member

Germany is probably already in recession.

Well, it's certainly not by the technical definition, but it's possibly (probably?) approaching. Thing is though, for Germany a .1% fall in GDP last quarter comes after a pretty decent recovery from the last recession. For the UK, it doesn't. Our GDP is still lower than its peak in 2007, whereas Germany's had risen by a little under 10% in the same period, and last quarter was IIRC an all time high- certainly close to.

a bond yield inversion isn't always followed by a recession

My bank seems obsessed with offering me loans.Certainly no sign of credit freeze there.

Thing is though, for Germany a .1% fall in GDP last quarter comes after a pretty decent recovery from the last recession. For the UK, it doesn’t. Our GDP is still lower than its peak in 2007

Both economies have grown by much the same amount since the last recession in local currency terms, just over 30%.

mefty

Member

Both economies have grown by much the same amount since the last recession in local currency terms, just over 30%.

Seriously? Yes this is true, but it's because the pound has crashed. The UK economy has shrunk, it's just that the pound has shrunk more. Hurrah!

By this measure, the german economy had its most succesful year ever in 1923

If you’re going to invest you need to wait for the stocks to dive first; of course timing that properly would be like playing roulette and putting it all on 18 ie a stab in the dark….

Not at all. some people on here rubbish technical analysis (looking at graphs, moving averages etc.) as a predictive tool but it's served me well. I sold everything in Spring 2000 and since then have only bought modestly in each significant dip. I still have less as a percentage of wealth in stocks than in the couldn't-go-wrong 90s but what's there is nicely positive. Positive for how long I don't know. Things aren't over-priced enough for me to completely pull the plug as I did before the 2000 crash but I'm expecting things to be cheaper in the future so I'm happy to sit on a lot of cash earning effectively nothing. But even cash in the bank is a risk as any Argentinian will tell you.

I never paid that much attention to my pension beyond ticking the box that said invest all over the world.

Will be sticking with that on the basis that having actual cash right now would be a bad idea.

having actual cash right now would be a bad idea.

Why? Any hint of inflation and stock markets will fall, any interest rise and the housing market will fall, bonds are just locking money up in the hope interest rates won't rise. When every asset class is priced for economic perfection in a world looking less perfect by the day cash is so safe that people are paying banks to hold it for them and banks have nothing better to do with it that earn negative interest from the ECB; minus 0.4%.

If you’re going to invest you need to wait for the stocks to dive first; of course timing that properly would be like playing roulette and putting it all on 18 ie a stab in the dark….

Or, rather than one big buy, just keep investing small(er) amounts regularly into a fund, i.e. every month, then you buy fewer units when the price is higher and more units when the price is lower.

Why? Any hint of inflation and stock markets will fall, any interest rise and the housing market will fall, bonds are just locking money up in the hope interest rates won’t rise. When every asset class is priced for economic perfection in a world looking less perfect by the day cash is so safe that people are paying banks to hold it for them and banks have nothing better to do with it that earn negative interest from the ECB; minus 0.4%.

But even cash in the bank is a risk as any Argentinian will tell you.

having actual cash right now would be a bad idea

I've made a shrewd investment decision for once then 🙂

I'd counter that with, the pounds crashed once due to brexit. So it's got two choices, recover very slowly post brexit in which case the ftse will remain stable and you're as good in either. Or crash again, in which case having a load of shares in both companies that rely on foreign markets or traded in those markets is better

The ftse went up by about the same amount the went down last time, so having cash isn't nessecerily the best option in a crash if your country is the one doing the most crashing.

Yep, each time the £ falls due to Brexit madness, my stocks wealth, in £, goes up by pretty much the same amount.

However, if we get a global downturn, all the blue chip internationals will drop as well, so no silver lining there...

I should perhaps have said that my cash in bank is mainly in Euros. Despite the dire warnings of THM I have more confidence in a currency based on the collective strength of Eurozone countries than a little island with a currency that has been in constant deline against the dollar since 2008 falling from 2 to 1.2, in an even longer downtrend. Euro-dollar has it's minor ups and downs but the Euro is higher now than at its launch.

The rise of the FTSE post Brexit is mainly explained by the International nature of FTSE company revenues which when converted into pounds mean higher earnings which flatter the p:e ration. if I'd invested in the FTSE from Europe with Euros I'd have lost money.

Are we not already in negative growth for a month - so the official recession will be in another couple?

Isn't it 2 successive quarters?

could be.

Yup. Which tbh is pretty meaningless but them's the rules

Seriously? Yes this is true, but it’s because the pound has crashed.

Yes, seriously, it's why if you look at the data of any supranational organisation which does economic analysis, such as the IMF or OECD, it shows consistent if often underwhelming growth for both countries over the period.