(New York)

Al the stars are aligning for gold. The metal has been in an epic slump for years. The great post-Crisis recovery has not been so for gold, with the asset falling in value considerably from its Euro crisis-era peak. However, yields are coming down and the threat of recession is rising, both factors which make gold likely to do well. Not only would both factors help gold because of its relationship to interest rates (i.e. the lower the better), but a weaker Dollar also helps overseas buyers of the metal.

FINSUM: The other interesting non-macro factor that may help gold is the recent huge merger of Barrick Gold and Randgold, which consolidates the market and offers a more compelling mining stock to own. It may also put a lid on supply, which could boost prices.

(New York)

Another day, another round of bad news for US real estate. New data on housing starts in February was just released and the results aren’t pretty. The number of new homes under construction fell 8.7% last month, a steep drop. The northeast was hit the hardest, with new starts dropping nearly 30% (thanks SALT limit). The only real gains in the country were in the Midwest, and only in apartments.

FINSUM: Not only did starts fall but new permits also declined, which means the bad run is likely to continue. We are curious how falling yields may boost mortgage issuance.

(New York)

For the last year all the fear in bond markets was about inflation and how the Fed would handle it. Were we going to be hiked into a recession? Now all of that has shifted and fixed income gurus are concerned over an entirely different beast—recession. In many ways the fears of recession have become so strong that they are intimidating the market as a whole, making the term “bond vigilante” more than appropriate here.

FINSUM: The speed with which the bond market has reversed since December is pretty alarming. We do wonder if this inversion might be a false signal.

(New York)

When you first read that headline, you probably thought it was pretty counterintuitive. Bank stocks saw a big selloff and it is looking ever more likely that we are headed towards a recession—certainly not bullish for bank shares. However, RBC Capital markets argues that bank stocks may actually do well. “The recent sell-off in bank stocks provides an opportunity for investors to buy bank stocks”, says RBC. The reason why is that in periods where the economy slows, but an outright recession is avoided, bank shares outperform. This happened from 1994 to 1998.

FINSUM: This could be a good value play if we avoid a recession, but that seems like a gamble with asymmetric risk to the downside.

(New York)

The professor who first identified yield curve inversions has written an article explaining what the development really means. First identified in 1986, a yield curve inversion is considered the most widely accurate indicator of recession. Since it was first identified and back tested, it has accurately predicted a further 3 out of 3 recessions. This is a point its “discoverer” Campbell Harvey hammers home in his article. He explains that an inversion is usually followed by a recession within 12-18 months. The yield curve has not been inverted since before the Crisis, but just did so on Friday.

FINSUM: One of the important points Harvey makes is that in order for the inversion to really indicate a recession, it needs to remain in place for at least three months. We are only at one day.