From a small northwestern observatory…

The stock market had a troublesome day yesterday — the Dow down about 1.8% and the NASDAQ down 2.5%.  We’re pleased that our in-house REIT fund, ACCRE, only fell about 1.06% yesterday, and is still up about 2.4% on the month, so we’re happy about that.  But enough bragging, let’s look at just what was troubling the otherwise still waters of Wall Street on Friday.

The biggest issue was an inversion of the yield curve.  This happens when the treasury bill auction (every Thursday) comes in at a yield higher than the 10-year Treasury note.  It is a harbinger of negative economic outlooks on the part of investors.  I wrote about this a few months ago, and at the time noted that while the inversion had not yet occurred, we were headed that way.  However, had previous trends continued, we wouldn’t see a sustained inversion for “some time”.

Is “some time” upon us?  Hard to say, but the FED turned remarkably dovish at its most recent meeting, indicating no further interest rate hikes this year.  This is apparently on the heels of a decreased forecast for 2019 GDP growth.  Coupled with some negative news from abroad, mainly Germany and France, and the signs are not very good.  Liz Ann Saunders of Charles Schwab echoed the previous sentiments of so many forecasters, myself included, that a recession was further down the road — perhaps 2021 or so.  Now, she says, it appears we could be using the dreaded “R” word later this year.

Stay tuned, folks…..