- The Opening Print
- Posts
- Inverted Yield Curve: A Recession Signal That Won’t Go Away
Inverted Yield Curve: A Recession Signal That Won’t Go Away
Danny Riley
March 04, 2025
Follow @MrTopStep on Twitter and please share if you find our work valuable!
Our View
The ES traded up to 6000.50 on Globex and made a 5997.00 high during the day session and that was all she wrote. It's now 3:30 PM, and after a big rip on Friday afternoon, buyers are puking everything they bought. The NQ just hit a low of 20,316.75, down -2.8%, while the ES dropped to 5821.75, down 2.1%.
It’s the same story, stocks got hammered, and bonds rallied as Trump continued his tirade against Ukraine, announced 25% tariff threats, and U.S. manufacturing costs jumped. NVDA took a beating, falling over 8.7%. It looks like Trump's "Make America Great Again" push has actually put the brakes on the U.S. stock market. Later, the MIM showed $700 million to buy. Because there wasn’t a big sell imbalance, that $700 million buy pushed the ES and NQ higher. In fact, the ES went out at a big premium to the S&P cash.
What do we know? On Monday, the ES rallied 137 points with $4.7 billion to buy on the 3:50 cash imbalance. Yesterday, the ES dropped 175.25 points. What stands out is how sellers completely shook off Friday’s rally.
Some believe the bond rally is just part of ongoing asset allocation, in other words, there’s institutional stock selling going on, a safe haven. I’ve given this a lot of thought and being a bull, it pains me but like I said in the OP yesterday, the rally on Friday’s close wasn’t going to change the current path. There’s just too much turmoil, both known and unknown.
Goldman CTA Flows:
Over the next 1 week…
Flat tape: -$11B to sell (-$4.7B SPX to sell)
Up tape: -$4B to sell (-$1.3B SPX to sell)
Down tape: -$40B to sell (-$12.6B SPX to sell)
Over the next 1 month…
Flat tape: -$27B to sell (-$11B SPX to sell)
Up tape: +$12.5B to buy (-$142M SPX to sell)
Down tape: -$193B to sell (-$58B SPX to sell)
Translation: CTAs are selling in every scenario with the worst case is $193 billion in global stock if equity markets continue sliding in the coming month and the selling will persist even if the market manages to rebound from here.