Yield Curve Slope

As said I was intrigued by CrossingWallstreet comment that "Probably the most fascinating stat is that all of the stock market’s net capital gains have come when the 10-year yield is 65 or more basis points above the 90-day yield (that happens about 70% of the time). The yield curve hasn’t been that positive in 15 months. Anything less than 65 basis points, including a negative yield curve, works out to a net equity return of a Blutarsky. Zero Point Zero."

So I had a closer look at the data. First here is a look at monthly S&P500 performance according to yield curve slope deciles.

	Decile	Perf
<	0.01	-0.3%
<	0.38	0.4%
<	0.64	0.4%
<	1.00	0.1%
<	1.30	0.9%
<	1.59	2.1%
<	2.11	1.0%
<	2.56	0.4%
<	2.95	0.6%
<	4.42	0.6%

Since April 1953 whenever the yield curve is negatively sloping the average monthly S&P500 perf is negative as well. The best monthly performances occur when the yield curve is sloping between +1.3% and +2.11%.

Using CrossingWallstreet's idea I updated the following chart of cumulative S&P performance. Zero cumulative performance as long as the slope is smaller than 90bp. Will add this consideration in my timing decision going forward.