Transcript:
Tom Vaughan:
Everybody, welcome to Wednesday, the S&P 500 was down point 6%. Today, we’ve had this huge run up going on now for two and a half weeks, finally had a little bit of a pullback today, actually think these types of things are positive, you need to get these pull backs to get kind of new buyers to come in to get us to the next levels. And so I’m not unhappy with what happened today, personally, we did see some information about what’s called the yield curve. And they look at a 10 year Treasury versus a two year treasury, theoretically, a 10 year Treasury should be paying a lot more than a two year Treasury because you’re having to wait a lot longer to get your principal back. But sometimes they get what’s called inverted where you actually get paid a little bit more on the two year than you get paid on the 10 year. And what the bond market is essentially saying in that environment is that they’re not that confident about the future. And so we see these inversions that happened before recessions. And so this is what you’re going to be hearing about quite often. And for a couple of seconds, on Tuesday, we had an inversion where the two year paid a little bit more than the 10 year. And so the market is kind of absorbing that. And it probably had something to do with some of today’s action as far as that goes. But if you look back historically, really, you need to see that inversion for two or three months before you really start to see some concrete evidence that you might be heading toward to recession. And the average time between inversion and recession is about 18 months. And in most of those timeframes, the market still did quite well, in that timeframe also.
So I would be a little bit cautious about trying to use this as some kind of a big signal personally. And I also feel like right now you have to be very cautious because the Federal Reserve has so much money invested in these treasuries and what have you, as they tried to unwind their balance sheets, and there’s a lot of different things that are happening that aren’t normal in a situation where you’re trying to look back historically and say, okay, inverted yield curve means XYZ. I’m not sure that’s true right now, so I’d be very cautious. I’ve also heard a lot of people, including myself, who much prefer the three month Treasury versus the 10 year Treasury, and that yield spread is actually quite high right now. So there is a little bit of an anomaly happening here, in my opinion, but nonetheless, we’ll see how this plays out. I think the market is okay. Very happy, what’s happening, really good momentum going forward. Again, don’t be surprised to see more pullback. And I think that’s probably very, you know, important. We had almost a 15% drop in the S&P 500, from high to low, not going to make that all back in a few weeks. Most of the times it takes some time, a few downturns here and there before it finally crawls back up. Seems to be what we’re doing so far. We’ll see what happens going forward, but really looking forward to seeing what’s gonna happen tomorrow, and I’ll talk to you that thank you very much.