“That is probably not what most people want to hear — stock investors especially. In the first half of the year, after all, stocks have performed spectacularly. The Standard & Poor’s 500-stock index returned 9 percent through June, churning out gains so regularly that it may seem churlish to note that clouds are appearing on the horizon.
Yet like a long-range forecast about a possible storm, an old and trusted financial indicator is telling us that trouble may be looming.
Simply put, while the Federal Reserve has been raising short-term interest rates since December, the bond market hasn’t gotten the memo. The longer-term rates that are set through bond market trading have, for the most part, been declining, though there was a brief reversal in the last few days. But the disconnect over the last few months is a sign that bond investors believe economic growth and inflation are still weak and the Fed’s actions are premature.”
A good primer on The Yield Curve – –