Over the past week, I have heard the yield curve being mentioned 3 times. The first was for a board meeting for a listed company, which I suppose would represent sophisticated investors. The second was by a retail investor, who was musing over the impact of the impending yield curve inversion. And the third was by a colleague who did not invest at all, but was wondering what this “inversion” means for the economy.
And suddenly, that got me very worried indeed. There’s a famous story about how Joseph Kennedy decided to sell all his stocks in 1929 when he started getting stock tips from a shoeshine boy. Today, it seems like even the “shoeshine boy” is talking about how a “yield curve inversion” will trigger an upcoming recession, which by a contrarian logic, would mean the exact opposite wouldn’t it?
Basics: What is the yield curve?