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Ulysses
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5 things investors need to know about an inverted yield curve
Aug 14th, 2019 at 2:51pm
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5 things investors need to know about an inverted yield curve

Listen up, kiddies...



Quote:
Why does it matter?

The 2-year/10-year version of the yield curve has preceded each of the past seven recessions, including the most recent slowdown between 2007 and 2009.

Other yield curve measures have already inverted, including the widely-watched 3-month/10-year spread used by the Federal Reserve to gauge recession probabilities.

“While we don’t know is how long the 2/10 curve will remain inverted, we do know is almost everything is upsetting the markets these days, and this inversion is pushing many to the brink of losing what was a deeply-rooted optimism for economic growth and equity prices,” said Kevin Giddis, head of fixed income at Raymond James, in a Wednesday note.

  

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wyattstorch2004
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Re: 5 things investors need to know about an inverted yield curve
Reply #1 - Aug 14th, 2019 at 9:51pm
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How many times has it happened without being followed by a recession?
  
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atreyu
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Re: 5 things investors need to know about an inverted yield curve
Reply #2 - Aug 14th, 2019 at 10:12pm
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wyattstorch2004 wrote on Aug 14th, 2019 at 9:51pm:
How many times has it happened without being followed by a recession?


Your question fascinated me.




The answer makes me even more concerned.
  
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wyattstorch2004
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Re: 5 things investors need to know about an inverted yield curve
Reply #3 - Aug 14th, 2019 at 10:35pm
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atreyu wrote on Aug 14th, 2019 at 10:12pm:
Your question fascinated me.

https://www.advisorperspectives.com/images/content_image/data/df/dff1d52be616b4f...


The answer makes me even more concerned.


Interesting that they also tended to follow a cycle of rate hikes.  And that when there was a recession following, it was, on average, 14 months later.  Thanks for the info.
  
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Ulysses
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Re: 5 things investors need to know about an inverted yield curve
Reply #4 - Aug 14th, 2019 at 10:51pm
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wyattstorch2004 wrote on Aug 14th, 2019 at 10:35pm:
Interesting that they also tended to follow a cycle of rate hikes.  And that when there was a recession following, it was, on average, 14 months later.  Thanks for the info.


Well, what isn't said is what the interest rates were doing before the rate hikes. I believe in general interest rates were lowered to try to goose the economy, and then when the economy looked to be overheating, the Fed would start to hike rates again. But I wouldn't say correlation equals causation, because by that time the economy may have started to burn out due to other factors.

But it is a useful graph otherwise.

  

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Ulysses
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Re: 5 things investors need to know about an inverted yield curve
Reply #5 - Aug 14th, 2019 at 10:53pm
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It's also interesting that a recession followed a 2/10 inversion on average by about 14 months.

Let's see... the November 2020 elections are... just about 14 months away.

Not looking so good for Donny.
  

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wyattstorch2004
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Re: 5 things investors need to know about an inverted yield curve
Reply #6 - Aug 14th, 2019 at 11:09pm
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Ulysses wrote on Aug 14th, 2019 at 10:51pm:
Well, what isn't said is what the interest rates were doing before the rate hikes. I believe in general interest rates were lowered to try to goose the economy, and then when the economy looked to be overheating, the Fed would start to hike rates again.



Which I pointed out in the other thread.  There is no bubble to burst if the low rates didn't create one.
  
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