market behavior in a recession/leading up to

Discussion in 'Trading' started by krazykarl, Jul 31, 2006.

  1. for those older and wiser then i, what are your observations on how the various markets act leading up to and during a recession? what kind of capital rotation do you see? how do the bond markets act?

    thanks in advance,

  2. I'm getting old and I don't know if I'm getting wiser. Prior to a bear market you will see a rotation into health services, drugs, hospitals, drug stores, mortgage investments(for yield), food products, aerospace, utilities, tabacco, and gaming stocks. In effect, kind of what we have been witnessing over the last month or so.

    If it is an inflationary period bond yields will continue to rise. If it is not yields will fall and the bond market will be the place to be.
  3. Pabst


    An inverted yield curve has predicated many a recession.....
  4. that was all over cnbc a few months back -

    the rumor on the street is that economists have also predicted 16 of the last 4 recessions.....

    (i stole that one!) :cool:
  5. Circle


    That was funny. Lol.

    An inverted yield curve does not necessarily point to recession (although it has had ~80% success). Obviously, there are many other factors (credit spreads, banctruptcies etc), that even when put together cannot forecast a recession 100%.
    Incidentally, there are several countries that have been in standard yield curve inversion (UK for example), but not in recession.

  6. yeild curve is a bunch of BS doesn't mean anything when it comes to predicting stocks. If you could use yield curves to predict the markets I would have already heard about it (as wll as millions of others) and made a fortune.
  7. bump for the recent RE numbers.

    anyone notice similarieis in the current market behavior to the early 90s?
  8. ramuk


    Gary Smith mentions High yield junk bonds as a reliable indicator for a recession.

    Specifically, he mentions the Merrill Lynch High Yield Bond index is making record highs (no recession in the near future).

    This was in the site.
  9. If you knew a trade had an 80% probability of success, would you take it? :)

  10. It's not 80% - it's more like 40%. would you still take it? :)
    #10     Aug 25, 2006