Major Recession on the Basis of Yield Curve
The US Treasury Yield Curve is currently inverted, meaning short term interest rates higher than long term interest rates.
This unusual occurrence, called a yield curve inversion, has historically been a very reliable indicator of an upcoming economic recession.
Since World War II every yield curve inversion has been followed by a recession in the following 6-18 months, and recessions are naturally correlated with decreased stock market returns.
The yield curve has not been this lowin over 40 years.
The yield curve indicator is always followed by a major drop.
Triggering of the yield curve indicator also (ALWAYS) lags the yield curve inversion.
In other words, the yield curve inversion must return positive before the indicator triggers.
This is due to the lagging effects of interests rates on the economy.
That being said, since the yield curve is currently severely low, we can expect (another) yield curve indicator to be triggered later.
Once it is triggered, I expect a long-term decline of the markets.
Based on historical data, the decline will last several months, if not years.
Best of luck (not financial advice).
This unusual occurrence, called a yield curve inversion, has historically been a very reliable indicator of an upcoming economic recession.
Since World War II every yield curve inversion has been followed by a recession in the following 6-18 months, and recessions are naturally correlated with decreased stock market returns.
The yield curve has not been this lowin over 40 years.
The yield curve indicator is always followed by a major drop.
Triggering of the yield curve indicator also (ALWAYS) lags the yield curve inversion.
In other words, the yield curve inversion must return positive before the indicator triggers.
This is due to the lagging effects of interests rates on the economy.
That being said, since the yield curve is currently severely low, we can expect (another) yield curve indicator to be triggered later.
Once it is triggered, I expect a long-term decline of the markets.
Based on historical data, the decline will last several months, if not years.
Best of luck (not financial advice).
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