What happens next is unclear, to the markets and maybe to the Fed.
December, 1984, marked the middle of the longest postwar expansion. Recent report shows the central bank chairman, committed to more openness, needs to choose his words more carefully. And maybe an end to Fed rate hikes sooner rather than later. Inflationary depressions, deflationary depressions, hyperinflationary depressions, etc. Banks and securities firm tend to get hit hard when rate spreads narrow since they borrow money at short-term rates and lend at long rates. Even if there was more of a gap until recently, it was still narrow by historic standards, said Schlesinger.
Just because carry trades weren't mentioned in this discussion does not mean people who frequent this place are unaware of it. Sorry, I was distracted, I meant sell short instead of sell long. And to make it even more interesting this time around, what does economic slowdown cause? Among other things, demand destruction for petroleum products. If the short end moves first, then holding long paper pays. They fear low long-term rates, when they should fear high long-term rates.
Stimulate and it mostly flows out the trade balance. It's always different when the boom is over, even if it's not different when the boom is on. December 1984, marked the middle of the longest postwar expansion.
It's also true that the inversion Wednesday was short-lived and relatively narrow. And that in spite of structural headwinds and a looming demographic crisis.