{"id":21150,"date":"2023-08-24T07:30:01","date_gmt":"2023-08-24T11:30:01","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=21150"},"modified":"2023-08-24T07:30:01","modified_gmt":"2023-08-24T11:30:01","slug":"why-the-long-term-picture-is-bearish","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/why-the-long-term-picture-is-bearish\/","title":{"rendered":"Why the Long-Term Picture is Bearish"},"content":{"rendered":"

Jeff’s Note:<\/strong> Last night, I sat down with Imre Gams to discuss his latest trading breakthrough<\/a>.<\/p>\n

It’s a new and exciting strategy to make more money, more easily, and with greater certainty than anything else you’ve likely ever seen before. And it’s returned a 79%-win rate for his readers.<\/p>\n

To watch the replay – and discover how this strategy could work for you – click right here.<\/a><\/p>\n

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Traders will often argue about the short-term direction of the stock market.<\/p>\n

Some folks are bullish. Some folks are bearish. Some folks straddle both sides of the fence.<\/p>\n

We’re traders. That’s what we do.<\/p>\n

But, as we argue about where stocks are headed in the short term, it’s important to keep the longer-term picture in mind. And that longer-term picture is bearish. VERY bearish.<\/p>\n

Take a look at this monthly chart of the 10-year Treasury bond yield curve…<\/p>\n

<\/p>\n

\"Image\"<\/p>\n

This chart shows the difference in yield between the 10-year Treasury note and the three-month T-bill.<\/p>\n

Most of the time, the yield curve is a positive number – the further you go out in time, the higher the yield.<\/p>\n

A negative yield curve – where short-term bills offer a higher yield than long-term notes – often occurs prior to an economic recession.<\/p>\n

Indeed, the first four blue arrows on the chart occurred just prior to significant declines in economic activity.<\/p>\n

They also occurred just before significant declines in the stock market. However, the declines didn’t happen while the yield curve was inverted.<\/p>\n

<\/p>\n

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Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/p><\/div>\n<\/div>\n

<\/p>\n

In fact, when the yield curve reached its most negative levels, stocks were closer to their bull market highs than they were to their bear market lows.<\/p>\n

The stock market declines occurred AFTER the yield curve shifted back into positive territory – when the yield on the 10-year Treasury note was higher than the 3-month T-bill. This usually happens when the Federal Open Market Committee shifts from a tight money policy – where the Fed is raising short-term interest rates – to an easy money policy where the Fed is lowering rates.<\/p>\n

After declining to the steepest inversion in my lifetime, the yield curve has started to move higher. It’s still a long way from positive territory. But it is moving in that direction.<\/p>\n

The market believes the Fed is nearing the end of its rate-hiking cycle and getting closer to lowering interest rates. Most folks seem to think that’s a good thing for the stock market.<\/p>\n

And if Chairman Powell even hints at lowering rates in his speech at Jackson Hole tomorrow, stocks will likely put on a blistering short-term rally.<\/p>\n

But if history is any sort of a guide, then the long-term picture is bearish. Stocks tend to perform poorly when the yield curve shifts from an inverted condition to an upward slope.<\/p>\n

And since the yield curve was recently more inverted than ever before, the longer-term picture for stocks is quite bearish.<\/p>\n

Best regards and good trading,<\/p>\n

\"Signature\"<\/p>\n

Jeff Clark<\/p>\n

<\/p>\n

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READER MAILBAG<\/h2>\n<\/div>\n

Where do you think stocks are headed next?<\/p>\n

Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com<\/a>.<\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

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