We are back with another lightning-round edition of The Daily Scoop. Here are the most important events that created a rather happy week in the stock market with all three indices moving upward every day:
The stock market had a fantastic start to November. We started last week by talking about a possible end to the U.S. and China trade war. Read more here.
Tuesday was another positive day in the stock market. The optimism about a possible end to the U.S. and China trade disagreements pushed all three indices at least 1% higher than where they started the day. Read more here.
Wednesday was another optimism-packed day at the stock market. Investors were expecting to hear about the day and the location of the meeting between President Trump and his Chinese counterpart to sign phase one of the long-awaited trade deal. Read more here.
On Thursday, came the news from China, that both parties have agreed to cancel some of their previously announced tariffs, and the market went wild. Read more here.
Finally, the upward movement slowed down on Friday. President Trump disagreed with the widespread news of Thursday. He told the media that the U.S. hasn’t agreed to remove all previously announced tariffs on China, and that news scared investors at the beginning of Friday. However, by the end of the day, all three indices have moved up enough to wrap up the week in the green.
Beyond the overall market, remember the yield curve and its inversion that spread the doom and gloom across all four corners of the stock market? Well, the inversion is gone. Yes, you heard it correctly. The yield curve is not inverted anymore. Now what?
More information is available in the “Water Cooler” section. Also, scroll down to read about what happened in the stock market last week.
- U.S. markets: All three indices finished Friday in the green zone, although the upward movement was much smaller than the previous days. The Nasdaq took the lead again and grew as much as 0.48%. And, the Dow barely finished the day in the green. Scroll to the “Overall Market” section to learn more.
- Cryptocurrency: Bitcoin’s price is down, and hovering in mid $8,000 now. Beyond technical analysis and charting, there is not much of an explanation for the decline. On most days, Bitcoin moves as participants buy or sell their stake, without any major economic or fundamental indicators. Yep, That’s Bitcoin.
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What happened on Friday?
Friday morning’s scare reminded everyone that the trade deal is not a big deal until its signed. And even then, there is always a chance for further drama. One sentence from President Trump about him not approving the removal of the tariffs had the power to wipe the gain that was accumulated the whole week.
What does this mean?
The yield curve is not inverted anymore.
So, what happened?
Who can forget the yield curve inversion saga? For quite a few months, the yield curve inversion was the talk of the town.
The yield curve inversion is an economic indicator that economists use to predict a possible recession on the horizon. The inversion happens when the short-term yield of treasuries surpasses the long-term yield. In a normal economic situation, you would expect a higher rate to borrow money for a longer period of time. Historically, when the opposite has been true, and it has lasted for at least a quarter, it is an indicator of a possible recession.
The yield curve inversion has lasted more than a quarter in the last few months, but in the last few weeks, the inversion has reversed back to normal.
Does it mean that we are safe?
Well, not really! We don’t want to scare you. However, the inversion has gone away because the Feds decided to cut the interest rate for a few times. The interest rate cut artificially pushed the yield curve back to normal. This steepening of the curve doesn’t mean the underlying economic concerns that have caused the yield inversion in the first place are gone overnight. As a matter of fact, almost before all historical recession, a yield curve inversion is followed by a back-to-normal situation.
Although we hate a recession as much as anyone else, yield curve inversion or not, we are not still back to normal.