Two The most Important Indicators Signaling Stock Market Crash (2020 Recession)
US bond market signals possible recession
American stock indices are heading down after the last indicator of an impending recession triggered in the US government debt market.
Dow jones lost about 550 points, while like S&P 500 fell by 2%. Nasdaq is down 2.2%.
Profitability 10-year Treasury bonds were below 2-year bonds for the first time since 2007. Investors worried about the economy target long-term defensive assets, pushing benchmark 30-year Treasury yields to new record lows.
Banks' shares also tumbled as it becomes more difficult to make a profit by providing money in the current environment. Bank of America and Citigroup fell 4.1% and 4.7%, respectively, while J. P. Morgan also fell 3.6%. Regional Bank ETF SPDR S&P lost by 2.65%.
Since 1978, there have been five reversals of two-year and ten-year returns, all of which were harbingers of a recession. According to Credit Suisse, on average, the recession came 22 months after the reversal.
Bond yield curve explained, is it signaling a stock market recession?
«Historically speaking, the inversion of this control yield curve means that we should now expect a recession from 6 up to 18 months, which will negatively affect our medium and long term prospects in the markets», – said Sevens report founder Tom Essay.
Macy Stock&# 39; s fell nearly 17% after the retailer released information about profit in the second quarter, which turned out to be much below analysts' expectations.
Investors are increasingly worried about the global economic downturn, as unexpected weak statistics from China have further complicated the situation in the world's second largest economy. Official data released Wednesday showed that China's industrial production growth slowed to 4.8% in July from a year earlier. This is the weakest growth in the last 17 years.
In addition to concerns, German GDP contracted 0.1% in the second quarter, fueling fears of a recession for Europe's largest economy. Eurozone GDP also grew by just 0.2% qoq, which is a significant slowdown compared to 0.4% growth reported in the first three months of the year.