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Is the yield curve broken? Analysis of the Inverted Yield Curve and Presidential Cycle - leading indicators for the Land Cycle recession

Updated: Jun 3

There’s still a lot of fear around regarding rate rises and their ongoing effect on the economy.

 

Yet despite various reports in the media claiming that the RBA is on top of inflation, and the cash rate may fall, this has never been the forecast for the second half of the cycle, at Land Cycle Investor.

 

This is because a common feature in the second half of the land cycle, is rising rates!


If you look at the lead up to the land price peaks in previous cycles – 1973, 1989, 2008 – rates always increased alongside prices.


That’s because the economy is typically perceived as going well due to the tidal wave of credit created and lent for speculation in preceding years.

 

Also, don’t forget the big rise in rents that has happened over the past 12 months or so!


Source: CoreLogic

 

The rising commodity cycle (k-wave) is another reason we wouldn’t expect rates to fall.


In practical terms, the K wave represents around twenty-two or so years of climbing commodity prices, peaking, before entering a deflationary cycle for a similar period. (I’ve written about the K-Wave in detail here.)

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