(New York)

Ten-year Treasuries are currently sitting at 2.85%, and according to Barron’s, they aren’t going anywhere. The reason why seems to be three part: a weak inflation outlook, trade war, and the combination of so-so growth and a hawkish Fed. All of this makes investors comfortable with sub-3% yields, and the bonds are being supported by their safe haven nature. Another problem is that US yields are much higher than in other developed countries, such as in Europe, keeping demand for Treasuries high.

FINSUM: We see longer end yields as pretty pinned at the moment. There is not much to be bullish about in the long term economic outlook, so it is hard to see why Treasuries would slide.

(San Francisco)

In what could be a major development for super power Apple, it was reported yesterday that the company was inching towards “Apple Prime”, or some sort of bundled service model similar to Amazon Prime. The company may combine news, magazine articles, and television into a single bundle. Some analysts say Apple needs to increase its service-based revenue, such as that built on monthly subscription fees, in order to continue to expand.

FINSUM: If Apple wants to keep growing at 5%, it needs to add the equivalent of a Fortune 200 company every year. That is a huge revenue goal, and this could be a way to do it.

(New York)

This might be a unique kind of bear market we have on our hands, at least according to Morgan Stanley. The bank’s chief US equity strategist says that this is a “kind of rolling bear market”. Continuing “We are not seeing an ’08 scenario where everything gets hit at once … it’s selectively hitting markets one by one and it’s a rolling sort of correction”. Since that seems to be the case, one good defensive sector to avoid turmoil might be US small caps, which are shielded from trade war and are benefiting from last year’s tax cuts.

FINSUM: We like this description of the kind of correction we are currently in. It might not be a single cataclysmic event that sends the market tumbling, but a series of blows that drives things down continuously.

(New York)

Losses on Bitcoin and other cryptocurrencies are reaching legendary proportions. Total losses on Bitcoin are now around 70% since its peak last December. The loss brings it close to the 78% decline in the Nasdaq seen during the Dotcom bubble. Many other coins have gone to essentially zero.

FINSUM: The Dotcom bubble is an interesting comparison. The reason why is that though prices were far too high, the market did call correctly that the internet would be hugely disruptive to industry and create very valuable businesses. Will the same happen with crypto, but ten years down the line?

(New York)

The flattening yield curve is an indicator of a recession and bear market to come. The last six US recessions have all been preceded by an inverted yield curve. Now it is happening again. The gap between two- and ten-year Treasuries was just 34 basis points last week, the lowest since 2007, or the eve of the worst American recession in almost 80 years. A few factors seem to be guiding the flattening. The first is the Fed’s bullish outlook on the economy and hawkishness on rates. The others are very weak inflation expectations over the long term as well as large demand for even modest long end yields, both of which have combined to keep ten-years pinned for some time now.

FINSUM: Yes a flattening yield curve is a bad sign, but remember that it takes, on average, several months (i.e. ~18 months) from when the yield curve inverts to when the economy actually goes into recession, with stocks historically continuing to rise along the way.