Weak smartphone demand implies a soft global growth ahead, continue to Short USD/JPY at peak?
Five reasons to explain the flat bond yield curve
One of the iPhone maker's biggest suppliers, Taiwan Semiconductor Manufacturing, warned last week of weak demand from the mobile phone sector. The warning heightened concerns about a slowdown in smartphone sales. A lengthy period of yield curve flattening that saw the gap between 2- and 10-year yields hit the lowest in a decade also implied the weakness of risk assets.
US stocks ended the week on a downbeat note, as the technology sector came under pressure from concerns about demand for smartphones. The main question is whether the current economic slowing down is the beginning of a secular trend or is it just a short-term cyclical effect. If it is a beginning of a secular trend, investors should always pick up safe-haven assets at dips.
The last time when the difference between long-term and short-term yields narrowed was before the financial crisis. An inverted yield curve — short-term rates higher than long-term rates — is not far away. In the past, this had been a recession indicator. To be fair, we illustrate 5 possible reasons here:
