Stock-Gold Switch Signals From The Yield Curve And The Federal Funds Rate
Published Dec 26, 2020 on Seeking Alpha

Seeking AlphaPortfolio StrategyStock-Gold Switch Signals From The Yield Curve And The Federal Funds RateDec. 26, 2020 6:19 AM ET|| Includes: AAAU, BAR, DDM, DGL, DGLD, DGP, DGZ, DIA, DOG, DXD, DZZ, EEH, EPS, EQL, FEX, GLD, GLDI, GLDM, GLL, HUSV, IAU, IAUF, IVV, IWL, IWM, JHML, JKD, OTPIX, OUNZ, PHYS, PSQ, QGLDX, QID, QLD, QQEW, QQQ, QQQE, QQXT, RSP, RWM, RYARX, RYRSX, SCHX, SDOW, SDS, SGOL, SH, SPDN, SPLX, SPUU, SPXE, SPXL, SPXN, SPXS, SPXT, SPXU, SPXV, SPY, SQQQ, SRTY, SSO, SYE, TNA, TQQQ, TWM, TZA, UBG, UDOW, UDPIX, UGL, UGLDF, UPRO, URTY, UWM, VFINX, VOO, VTWO, VVby: Georg VrbaGeorg Vrba Long/Short Equity, Value, minimum volatility, MomentumI Market Signals.cls-1{fill:#024999;}SummaryThe Yield Curve/Federal Funds Rate Timer signals the switches from stocks to gold and vice versa near or during recession periods.
Only three parameters are needed; the Effective Federal Funds Rate and the 2-year and 10-year U.S. Treasury yields to determine the periods when the yield curve is inverted.
The timing rules are based on the state of yield curve and on the trend of the Effective Federal Funds Rate.
This timer signals switches from stocks (S&P 500 Total Return) to gold and vice versa near or during recession periods.
Only three parameters are needed, the daily Effective Federal Funds Rate (EFFR) and the 5-day moving averages of the 2-year and 10-year daily U.S. Treasury yields as measures of short-term and long-term rates.
The Forward Rate Ratio (FRR2-10) is calculated from the two Treasury yields. It is the ratio of the rate at which one can lock in borrowing for the eight-year period starting two years from now and the current 10-year rate. A FRR2-10 greater than 1.00 indicates a positively sloped yield curve (10-year note yields are higher than 2-year note yields); a FRR2-10 less than 1.00 indicates an inversion of the yield curve (2-year note yields are higher than 10-year note yields). Note that the last eight recessions were all preceded by a FRR2-10 less... Read more