Economy and Bond yields in general

Haven’t updated in a bit as I’ve been rather busy lately, but recent turnout of economic events have really been worrying on the world economy as a whole. Off the top of my head:

 

  1. Fed rate cuts in Aug, set to cut again in Sept to stimulate the economy. This has been driving bond prices up alot, which means yield have been steadily decreasing (US T bonds), so much so that it has been inverse for quite awhile now (last 7 times the 10 year yield < 2 year yield, it has all led to recession, so fingers crossed this time).
  2. US China trade war seems to been waning, but China needs to sort of Hong Kong first before Trump and Xi can come to a fruitful conclusion. China economy experience sudden and steep decline in their economy mainly due to a decreased demand for Chinese Exports, which again is due to the US China Trade war.
  3. Italy’s already fragile economy just took a hit for the worse as well, after their PM of one and a half years resigned from the position. 10 year yield has hit a new low of 0.9%, after steadily declining for the past few quarters.
  4. Germany, one of top 3 Euro Economy, issued negative yield 30 year bond a couple of weeks ago (albeit only half subscribed, deeming a fluke). Rather telling of how the government there is foreseeing future economic outlook as well.
  5. Japan and South Korea engaging in their own trade war as well, which is doubly bad for SG on top of the US China trade war given that we are such a trade dependent economy.
  6. SG itself, GDP growth expectation was cut from 1.5 – 2.5% to almost 0%, due to trade war. Singapore Government Securities have hit a new low of 1.6%. SSB also offering about 1.7%.

 

If recession does rear its ugly head, time to go into a more defensive investment strat (perhaps more Fixed Income in Government bonds, less high yield growth stocks, lesser small cap equities, more Indices, forex commodities to keep a lookout for opportunity daily). NASDAQ has been swinging lately, great opportunities for swing / trend trading too.

AUGUST 2019 – Marcus

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