Normally, I would be trumpeting the positive slope in the yield curve as an important bullish indicator, but I think this is off the table. The Fed Funds Rate was raised on December 16, and now I think we have a clear pattern of both long term yields and equity prices dropping. This is a clear recessionary indicator. The Fed erred. The only question at this point, I think, is how much of a contraction we are in store for while they attempt to save face.
I think if they reversed the hike soon and expressed confidence in the economy and a commitment to monetary support, we would see a continuation of the recovery. But, the longer this goes, the worse it will be.
We could also be saved by mortgage expansion, but after a promising November, closed-end real estate loans at commercial banks have flat-lined again. There is a broad consensus against supporting mortgage expansion or real estate markets or implementing any public policy that might be seen as supporting stock prices. That is a context ripe for a contraction.
For years in the 1990s and 2000s, in a deflationary context, Japanese 10 year bonds ranged between 1% and 2%. Ten Year Treasuries are now just over 2%.
The drop in long term bond yields and the stock market are clear symbols of approaching declines in broad incomes. This is probably not the best time to have cyclical exposure.
Added: Update from Marcus Nunes, with many graphs.