10Y/2Y inversion and consequences
10/2 curve has inverted for the fourth time in the last 35 years. There was a brief inversion in 2019, which was only marginal and not marked on the chart, but its consequences do not contradict the following conlcusion to the least.
Every time, without exception, 10/2 inversion meant substantially lower 10Y rates (bond bull market) for a prolonged period of time, i.e. substantial economic slowdown and a recession. In 89-90 it caused a limited pullback in stocks, but in 00 and 07 it caused a full blown bear market.
The message is clear for investors with longer term outlook: get out of stocks and buy bonds.
Every time, without exception, 10/2 inversion meant substantially lower 10Y rates (bond bull market) for a prolonged period of time, i.e. substantial economic slowdown and a recession. In 89-90 it caused a limited pullback in stocks, but in 00 and 07 it caused a full blown bear market.
The message is clear for investors with longer term outlook: get out of stocks and buy bonds.
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