Business to cut production. Bad news for commodities. Good news for bonds.

 

 

The inventory to sales ratio for wholesalers is too high. The last time the I/S ratio was at these levels the economy was facing a major recession. (See above chart, click on the chart to enlarge it).

Sales are rising too rapidly and inventories are building up. Business needs to bring down the I/S ratio to around 1.15.-1.20. The economy will grow slowly as they try to achieve this feat. 

The slower economy  will keep commodities from rising and inflation may even morph into deflation. Bond yields would decline under this scenario.

Time will tell, of course. And thank you for vising my blog.

More details in The Peter Dag Portfolio on www.peterdag.com

George Dagnino, PhD
Editor, The Peter Dag Portfolio

Since 1977

Author, Profiting in Bull and Bear Markets

No. 1 bond timer in the past 12 months. 

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