The Yield Curve Inverted – What now?

With the two and ten-year US treasury yield inverting in August 2019, many analysts are predicting that the US economy is heading for a recession within the next 24 months.

Credit Suisse recently reported that the last five times (since 1978) the two and ten-year rates inverted it has eventually led to a recession on average around 22 months later. In this time the S&P has generally rallied close to 12-15%.

Not sure what a Yield Curve Inversion is? Read the description here.

So does this mean there will be a recession again? Well nobody (including me) knows for sure, I’ve always been a believer that correlation doesn’t always imply causation. For me, I will be trying to keep some cash on the sidelines and will instead look at making smart investments where valuations seem skewed.

Remember there’s plenty of macro-environment factors that you should be aware of such as ongoing trade wars, Brexit, upcoming US presidential elections, extremely low-interest rates globally and a significantly overvalued stock market.


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