The yield curve continues to press upward from the mid-year lows. This is mildly bullish, but I would still say that the yield curve is in bearish, inverted territory (below the trendline in the second chart). We may sit here for a while (several months?), but my guess is, per past patterns, that either 10-year yields will move up above 3%, and the Fed will keep the target rate low, and we might escape a contraction, or 10-year yields will remain close to where they are, and eventually the entire yield curve will move back down toward zero, and we will have some sort of contraction. I don't think the contraction would be extreme, and it may not even bring much of a decline in equity markets. The ingredients that made 2008 so disruptive aren't in place today. The Fed appears to be ready to react to contraction without as much delay as they allowed in 2006-2008. And, though perma-bears will always be with us, as are the poor (in the long run, maybe they are one and the same!), I don't get the sense that the same suicide cult mentality is so strongly shared as it was in 2008 when Americans would only be satisfied with some sort of financial meltdown.

So, in short, this month doesn't change my posture much. I think the odds are greater than 50% that future near term yields will be lower than current forward yields, maybe a slight rise in unemployment and decline in equities if the inverted yield curve, as I see it, does signal some coming contraction, and housing that will probably look a lot like 1999-2001, at worst seeing a slight pause in growth.