Is Flat Yield Curve associated with elongated Bull Run followed by Bear Market and vice versa?

Is Flat Yield Curve associated with elongated Bull Run followed by Bear Market and vice versa?

Please see the following charts and comments which are self explanatory (A study over 16 years of Dow Jones Industrial Average and US 10 Year Treasury Yield)

Highlights during 1992-1994

 DJIA consolidated between 3200-3500 and 3500-4000 in two phases.
 Yield Curve was steep during 1992-1994 and flat by 1994 end after which bull run started from 1995 onwards.

DJIA 1992-1994 Consolidation before onset of 95-00 Bull Run



Yield Curve 1992- End 1994 (Steep during 1992-1994, and flat at 1994 end)




Highlights during 1995-1999

 DJIA rose from 4000 to 11800 in prolonged Bull Run.
 The steeper Yield Curve in 1995 gradually flattened Y-O-Y till 1999

1995-2000 The great TMT Bull Run




The Yield Curve in 1995 was steeper followed by flattening Yield Curve Year after Year till 1999



Highlights during 2000-Mid 2003
 DJIA collapsed from 11800 to 7200
 The flat Yield Curve of 2000 turned into steep by 2003


The Great Post TMT Collapse Mid 2000-Mid 2003



The PURE FLAT Yield Curve in 2000 (the last leg of 95-00 Bull Market) turned into gradually a very Steep Curve till 2003



Highlights during Mid 2003- End 2007

 DJIA rose from 7200 to 14000 in the long Bull Run.
 The steep Yield Curve in 2003 turned flat and negative too by 2007
 The Yield Curve has become steep again (2003 alike) in the span of 6 months

The Great Bull Run of 2003-2007



The Steep Yield Curve in 2003 turned into extremely flat (at time negative) till 2007 and has suddenly become very steep again (infact 2003 alike) due to sudden Fed move.



Comments:

 When interest rate is at extremely lower level (1% at start 2003), consumers and corporates start borrowing gradually and the up-cycle begins.

 After the onset of positive sentiments, excessive borrowing on both consumer and corporate side begins. Consumer borrowing feeds consumption and housing demand. Corporate borrowing leads to investment demand (2004-2006).


 It leads to inflation and central banks keep raising short term interest rate to deal with it and yield curve goes flatter or at times negative (2004-2006)(As generally Central Banks' action leads to decline in short term interest rate while long term rates remain untouched). But due to positive sentiments and seemingly increased income stream projection, borrowing keeps happening with exotic structures to attract consumers (like teaser rates loan)

 After some time, consumers start feeling the pinch of loan repayment and start consuming less. Corporate, due to excessive capex, faces idle capacity (2007 onwards)

 Prolonged increase in interest rate leads to slowdown in economy and markets comes down. It is the fag end of flat yield curve period which leads to onset of bear market (end 2007).

 With the start of bear market, as economy slows down and inflation fears wane away, central bank decreases interest rate. However, due to negative sentiments, not much borrowing happens to lift up the economy.

 Gradually yield curve steepens with short term rate trending downwards, and the up-cycle begins with start of borrowing activity when the interest rate starts looking very attractive.