Regard for recent recession fears and yield curve inversions, the bull market should live on until early 2021, analyst Tom McClellan responded Thursday on CNBC’s “Closing Bell. “
“Everyone needs to just keep their pants on for now and realize that the surrender curve gives a really long early warning about trouble,” said McClellan, editor of the McClellan Demands Report.
“[It] doesn’t say that trouble is upon us now. It takes several months to over a year before we get the final evaluation high after a yield curve inversion.”
A yield curve inversion happens when shorter-term bonds turn over higher yields than longer-term bonds. This inversion has preceded every U.S. recession in the past half century.
The benchmark 10-year Funds note yield dropped below the 2-year Treasury yield this week and worsened Wednesday morning, distinction the biggest spread since 2007, the start of the Great Recession.
While both the 10-year yield and the 2-year succumb have mostly recovered since Wednesday, it still remained inverted at 1.49% and 1.53% respectively Thursday.
The 30-year Funds bond yield also fell to an all-time low of 1.91% Wednesday, and yields around the world dropped to multiyear or time lows.
However, despite recession warnings, many analysts including McClellan are saying that the inverted give up the fight curve is not the most reliable recessionary gauge.
Art Cashin told CNBC earlier Thursday, “The inverted relinquish curve is slightly suspect because this time it’s for a separate reason.” He explained that past inversions succeeded when the Fed was tightening policy, whereas this time it’s coming during a loosening period.
Bespoke’s Paul Hickey suggested Wednesday on “Squawk Box ” that a yield inversion “isn’t just a switch” for recession.
McClellan said, “If you get an instance disposed to 1995, there was a very momentary yield curve inversion and then it backed off and the bull market kept on present. So that is possible.”
“The point is, don’t panic now if you’re a stock market investor about yield curve,” he added.