Medicare Agent News: Hitting the Curve

Tuesday, March 29, 2022

Hitting the Curve

By Alex Eule | Tuesday, March 29

24/7 Investing. Investors remain an optimistic bunch. Stocks jumped at the open, as negotiators for Russia and Ukraine reportedly made progress toward a cease-fire. The major indexes closed at, or near, session highs, with the S&P 500 gaining 1.2% and the Nasdaq Composite surging 1.8%.

We can all hope that the optimism is warranted and that peace is on the horizon. But there's no easy fix for the shattered world order.

"Any hopes for a return to ordinary economic times—if that is what one can call year three of life under Covid-19—should be tempered by an acknowledgment that Russia was exporting instability long before the invasion and is likely to continue," my colleague Matt Peterson wrote today.

Despite worries across the world, there are signs that retail investors have re-engaged with stocks amid the optimism.

The popular meme trade, led by companies like GameStop, AMC Entertainment, and Bed Bath & Beyond have soared in recent days. Today, Robinhood Markets, the online brokerage firm where many of the meme stocks are traded, joined the party. Its shared soared 24% after the free-trading pioneer said that its users would be able to trade from 7 a.m. to 8 p.m. Eastern, adding four hours to the day.

"We’re working towards 24/7 investing," the company said in a blog post.

It's a sign of the times. "After-hours trading was once considered too risky for average investors, but electronic trading and looser rules have opened up after-hours trading to a much wider group of investors in the past two decades." Barron's Avi Salzman writes. He notes that the new trading hours would, in part, give Robinhood customers greater access to non-stop crypto trading.

"The more that customers can trade stocks round the clock, the more that the stock market could resemble the cryptocurrency market, where traders often feel the need to monitor Asian markets after they go to bed, and keep an eye on their phones on the weekends, too."

As long as investors are optimistic, it's an alluring option. But there are warning signs emerging that could burst the retail bubble.

Bond markets flashed red today, when the closely watched yields on the 2-year and 10-year Treasury notes briefly inverted. In that moment, bond traders were paying higher yields for short-term loans than longer ones. It's not meant to be that way and suggests worry about the near-term economic climate. The inversion of the 2- and 10-year notes is a predictor of recession, but it's not perfect.

"Inversions in that part of the yield curve have been used as a recession indicator longer than some bond traders have been alive," Alexandra Scaggs wrote on Barrons.com today. "The link was originally identified by Duke professor Campbell Harvey in 1986."

But context is key. Alex adds:

...researchers have found that the curve needs to remain inverted for a period—weeks or months, depending on whom you ask—before it is a reliable recession indicator. When it does invert persistently, it has been “strikingly accurate” as an indicator of economic activity, as researchers at the San Francisco Fed wrote in 2018.

Strategists make the point that recession definitely isn’t imminent when the yield curve inverts, because it usually takes anywhere from 12 to 24 months for the economy to contract.

A lot can happen in 12 to 24 months, especially when markets are going 24/7.