Relax, the markets are okay

There's a big to-do about the recent selling in the stock markets.  After looking at a few charts, there doesn't appear to be any problem---yet.

First, let's look at the Dow:

To be sure,  the trend is leveling off, but that is healthy.  Parabolic markets are a troublesome sign.  They could not go up forever.

Now, let's look at the yield curve.  The yield curve can give us an early warning of recession:

In 2016, the yield curve was at a much lower rate.  This was in agreement with sluggish growth.

The spread between the lowest and highest rate was about two percent.  This is indicative of an upswing, which did occur.  The yield curve is flattening, however.  It could mean trouble, but it is too early to tell.

Let's look at current conditions:

There is a much tighter spread between the short term and the long.  If they invert, that is indicative of a recession.  They are moving in that direction, but slowly.  It is not a big issue, yet. the tightening is along the longer term yields, like the 30 year.

In fact, the 1 year yield and later has been moving lower.  This indicates a lot of buying on the long end.  The selling in the stocks and the buying of the bonds would indicate the possibility of a slow down.  But there is no inversion.

An inversion means that the long term yield is lower than the short term.  This means a tight monetary policy.  Monetary policy has been tightening somewhat, but you should expect that in a robust economy.

Keep an eye on this.