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May 31, 2018 | What Does the ‘Drop’ in Interest Rates Signal?

Donald B. Swenson: Born January 24, 1943, Roseau, Minnesota. Graduated H.S. 1961, Moorhead High, Minnesota. Graduated College 1968, Moorhead State University, Minnesota. Designated member of Appraisal Institute (MAI), 1974. Employed with Western Life Insurance Company, 1968 – 71; Iowa Securities Company, 1971 – 73; American Appraisal Company, 1974 – 81. Part-time teacher/valuation consultant/bartender, 1979 – 2008 (taught workshops at Waukesha County Technical Institute, Wi. and Madison Area Technical College, Wi.). Retired 2008 (part time teacher/blogger), AZ. Self educated economist/philosopher/theologian: http://kingdomecon.wordpress.com.

US 10-YR (US10Y:U.S.)

Real Time Quote Exchange
Yield | 3:43:16 PM EDT
2.839 %

-0.005
Yield High Today2.89%Yield Low Today2.82%
The 10 year treasury was up to 3.12% earlier in May and is currently 2.83% ( a drop of 29 basis points). This is substantial given that the Fed recently increased the base rate by 0.25%. What does this signify about our general economy? Could it be that our economy is sharply slowing? I think so! The Trump tariff actions and the drop in interest rates signals that our markets are changing from growth to stagnation.

 

Real estate is starting to slow and this trend will continue IMO. Retail trade is slowing and the Baltic Dry Index is down 24% YTD. We could be witnessing the beginning of a recession which will not be recognized officially for a few months. Our markets have increased for some 110 months without any serious correction. It appears that a major correction could be on the horizon. Some additional evidence is now emerging.

 

Our dollar index DXY is now at 94 (up over the past month) which also suggests that investors are not real confident about equities…and imports are currently stagnating. America’s budget deficit is now some $757 billion and our Congress is making no effort to deal with our debt and deficits. Our trade deficit with China is up (now $390.5 billion) and all the Trump talk has not lowered these deficits or improved our trade positions. Our exports are also starting to stagnate.

 

It appears, to me, that our overall economy is slowing and this trend seems to be affecting all global markets. All this means that a recession is on the horizon and could have already started. The positives are the consumer confidence level which now stands at 128.0 (up from 125.6 in April). This suggests that consumer spending could continue to keep the economy strong for a few weeks. But a change could be happening to the general economy. Watch the 10 year for new signals and also Fed actions. I am: https://kingdomecon.wordpress.com.

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May 31st, 2018

Posted In: Kingdom Economics

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