US 100 INDEX. THREE WORDS THAT YOU SHOULD KNOW - LET'S GO DIVING
There are looming risks that could "break" the US economy and end its current growth cycle.
Third-quarter GDP estimates are tracking above 5% and the US economy has added more than 2 million jobs year-to-date.
But there are three looming risks that could "break" the stock market and economy and end its current growth cycle, according to a Tuesday note from Ned Davis Research. These are the three risks to consider.
1. A resurgence in inflation
Inflation has made progress in trending towards the Federal Reserve's long-term 2% target after CPI peaked at about 9% last June, but any resurgence in rising prices would threaten the trajectory of the Fed's current tightening cycle.
2. The 10-year Treasury yield is around 5.00%
The 10-year US Treasury yield has surged so far this year, hitting a 16-year high of 5.02% on Monday. A further increase in this key benchmark rate would spell trouble for the broader economy, specifically if the yield breaks above the 5.25% level.
The 5.00 - 5.50% yield range
TNX
was an important double-top in 2006/2007, and also represented the peak policy rate of that tightening cycle.
So perhaps we wouldn't take a break of that level lightly.
Higher interest rates increase borrowing rates for consumers and businesses and often curtail demand, leading to slower economic growth, if not a contraction in growth. The 10-year US Treasury yield was at 4.86% on Tuesday.
3. Credit conditions deteriorating
So far this year, the bond market has been more concerned about interest rate risks than credit risks.
Technical graph below for US 100 Index
NDX
says that main 125-Day SMA support has been broken as well as major upside trend, and technical figure known as "Head and Shoulders" is in progress right now.
Third-quarter GDP estimates are tracking above 5% and the US economy has added more than 2 million jobs year-to-date.
But there are three looming risks that could "break" the stock market and economy and end its current growth cycle, according to a Tuesday note from Ned Davis Research. These are the three risks to consider.
1. A resurgence in inflation
Inflation has made progress in trending towards the Federal Reserve's long-term 2% target after CPI peaked at about 9% last June, but any resurgence in rising prices would threaten the trajectory of the Fed's current tightening cycle.
2. The 10-year Treasury yield is around 5.00%
The 10-year US Treasury yield has surged so far this year, hitting a 16-year high of 5.02% on Monday. A further increase in this key benchmark rate would spell trouble for the broader economy, specifically if the yield breaks above the 5.25% level.
The 5.00 - 5.50% yield range
TNX
was an important double-top in 2006/2007, and also represented the peak policy rate of that tightening cycle. So perhaps we wouldn't take a break of that level lightly.
Higher interest rates increase borrowing rates for consumers and businesses and often curtail demand, leading to slower economic growth, if not a contraction in growth. The 10-year US Treasury yield was at 4.86% on Tuesday.
3. Credit conditions deteriorating
So far this year, the bond market has been more concerned about interest rate risks than credit risks.
Technical graph below for US 100 Index
NDX
says that main 125-Day SMA support has been broken as well as major upside trend, and technical figure known as "Head and Shoulders" is in progress right now.
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