hello and welcome back to load it's been
a fairly ugly end to the week quite a
sharp sell-off in the US stock market to
end friday let me now try to put that
into perspective what we've take a look
at taking a look at first is the oil
price obviously something that's
preoccupied many people for a while now
that very very sharp tumble in the
latter half of 2014 what is intriguing
is that there's been huge volatility
ever since then but we basically gone
flat ever since at the beginning of 2015
it doesn't feel like that there's been
this intense volatility we've tended to
overcompensate for that now if we take a
look at this next charts you can see
that that's a place to one of the more
important nature's of the oil market it
may be very volatile but in the long
term oil price and the gap between
demand and supply for oil that's using
numbers set from the IEA are remarkably
close the price gets very high when
demand outstrips supply the most as it
did in 07 and 08 and the price gets very
low when supply outstrips demands by the
most last year that could imply that the
oil price is very sensitive to changes
in oil in the demand and supply perhaps
more accurately it means that demand and
supply actually respond quite quickly to
changes in the oil price this means i
would suggest given that there is
concern about whether the oil price is
about to fall once more that we should
always keep an eye on that for the long
term there is no particular reason to
think that oil prices will stay low for
a very long period because the way the
market works is that we can expect
demand and supply to adjust now moving
on to the news that was moving the
market today we heard about us retail
sales and as you can see these were
really pretty sharply good results of
three percent annual growth so you can
see after quite a slow clip most of last
year it does look as though the consumer
is buying stuff not at the rates we saw
10 to 15 years ago but still
plainly ticking up plainly reason for
some comfort now why therefore would we
have seen the sell-off that we saw in in
the stock market one argument is that
because we've seen strong macro data
today betters worried people that the
Fed is more likely to raise rates sooner
rather than later that's something that
the stock market doesn't want to see
however if you look at the Fed Funds
futures market it isn't showing any
particular rise in their expectations on
rates that's still seen as barely a
50-50 shot that will have even one rate
rise by the end of this year however it
now let's take a look at the bond market
and here we do have one signal that
might have worried people very much this
is the yield curve many people are
rather frightened of bond market
technologies terminology it's fairly
straightforward this shows you the gap
between the yield on the 10-year
Treasury and the two year Treasury when
that gap is lower or in other words when
the yield curve is flattered that means
that investors generally expect rates to
rise less in future inflation to rise
lesson future and growth to be slower in
future in other words a flatter yield
curve is a bearish signal and when the
yield curve actually becomes inverted
when the ten-year drops below the
two-year that is a classic recession
indicator we have seen the yield curve
flatten very sharply the last few days
and I saw today it is now as flattest it
has been at any point since the end of
2007 on the the dawn of the financial
crisis and the Great Recession somehow
or other the bond market at the moment
is spooked and worried about a recession
despite what is broadly positive data
that may be the best explanation for why
stocks are having a bad time of it and
why it's now almost a year since we saw
the all-time high in the S&P 500