I have constantly talked about being focused on the 17-year cycle in the economy and markets
1972-1974...17 years later
1989-1991...17 years later
2006-2008...17 years later
2023-2025...17 years later???
In that respect let us look at what has just happened on the 2-year yield
Cycle high leading into the GFC in 2006 was 5.275%
Cycle high this time in 2023 was 5.257%
Yield then fell sharply and bounced back just above the 76.4% retracement area in 2007 (overshot by 5 bp's)
Yield then fell sharply and bounced back just above the 76.4% retracement area in 2027 (overshot by 5 bp's)
Yield then fell sharply again, collapsing in July 2007 just short of the low in the first move down
Yield then fell sharply again, collapsing in July 2024 just short of the low in the first move down (4.12%)
Yield broke the support level in August 2007, went sharply lower, and in early Sept 2007 went 144 bps below the fed Funds rate.
In 1989,2001,2007 we saw the 2-year yield more than 140 bp's below the fed Funds Rate before the first fed cut- and that did not end well
The Fed meeting was 18 Sept 2007 and is now set for 18 Sept 2024 -exactly 17 years to the day later.
On 18 sept 2007 the Fed cut 50 bp's- Just sayin...
