Call it a major hangover. The reversal in tariffs did not come from a position of strength. It came as a result of global economic reality sinking in and crushing US markets.
Turns out trade wars are not easy to win and the global growth picture is not looking good. Last week, the UK announced negative GDP growth
for the past quarter. This week, it’s Germany announcing shrinking GDP
with its 10-year bond hitting a record negative
0.62% yield. Then there’s Europe seeing negative industrial production, and China announcing its lowest industrial production growth in 17 years
The collapse in global bond yields has been a theme since October of last year, with 10-year US Treasury bonds dropping
to 1.6% from their October 2018 high of 3.23%. Now that the two-year/10-year Treasury yield curve has inverted
, the recession alarm bells are ringing. Why? Because every single recession in the past 45 years has seen a yield curve inversion preceding it.