GreenBox Advisory

The bond market's recent surge has been fueled from the fears of inflation caused by the 1.9 trillion stimulus package. Investors are fearful of that this huge package will cause inflation because the demands in the economy will increase without the limited supply which will cause prices to skyrocket and devalue the USD. The only way to combat inflation is to increase interest rates because it will encourage more savings, such as in a bank, and less spending such as taking loans to buy a house. The U.S. 10 Year Treasury bond has been up almost 40% the past month to 1.572% which further shows the threat of inflation is real because the interest rates rising shows inflation fears are real and needed after all this money being added into the economy.  The S&P 500 and Nasdaq Composite have been taking some hits in the past few weeks and is starting to show the end of the bull market and the start of the bear market. The Nasdaq has been down almost 10% in the past month an...

   A recession is when the economic activity of a country declines which affects businesses negatively because of consumers wanting to spend less money.    The short terms bonds are yielding more interest than long term bonds which indicates an inverted yield curve. This inverted yield curve could signal a recession happening in the US economy within the next year because of uncertainty in the economy. Investors are willing to invest more in long term bonds than in short term bonds causing a higher demand in long term bonds which decreases their yield while the Federal Reserve would increases the yield for short-term bonds to help the economy grow.     An example of an inverted yield curve leading to a recession is when in 2006, there was an inverted yield curve for most of the year which led up to the big recession in 2007.

              Investors expect the Feds to lower interest rates as a response to the trade war with China. Lower interest rates would stimulate stock market growth after the US stock market suffered losses from tariffs so the Feds would most likely decrease the interest rates to combat the effects of the tariffs and to help the stock market bounce back from their losses.                Lower interest rates would also mean that buying bonds right now would cause their value to increase because of their high interest payments compared to the lower interest rate payments in the future from lower interest rates. If the the Feds were going to increase interest rates, then bonds with lower interest rates would have lower values than the bonds from the soon-to-be higher interest rates because the lower interest rate bonds have less return than the higher interest rate bonds.        ...