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The economic machine at work

Even though the recession expectations for 2023 have disappeared, some investors are speaking with their money and they seem to be saying the contrary. The chart below shows the long term treasury etf #tlt on the upper section, and the flows in the lower section. As you can see, money is going into the long end of the curve even though is inverted, and the short end yields more than the long end. Investors seem to be betting on the fed cutting rates, probably because of an economic slowdown. And it seems to be the normal course of action before a recession: inverted yield curve, unemployment goes up, productivity goes down, #eps go down, the fed lowers rates, the short end of the curve plummets and the long end of the curve is bid. In this case it will also coincide with big issuance of long term bonds by the US treasury to cover the budget deficit. The economic machine at work.

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Chart source: Bianco research

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