A ceasefire between the world’s two biggest economic powers is helping the US stock market end 2019 at record highs. This trade optimism has drowned out everything else. It marks quite a turnround since August, when the yield curve on US government debt inverted, sparking fears of a looming recession.
It would be negligent to dismiss that threat quite so easily. The bond market is better than the stock market at predicting economic downturns. Investors forget the summer’s warning at their peril.
Veteran investor John Templeton once dubbed “this time is different” as the four most expensive words in the English language. The first time I heard the costly phrase was in a finance lecture at university in the mid-1990s.