Market experts have been warning investors to brace themselves for a global recession since the start of 2015.
Much more recently, we hear them sounding the alarm because the yield curve has inverted.
The difference (spread) between the 10-year and 3-month Treasury yields. The orange shaded areas indicate US recessions. Data from the US TreasuryA yield curve inversion has historically implied that a recession for the economy (and supposedly, a bear market for stocks) might just be around the corner.
You can see this quite clearly – when interest rate spreads go below the “zero” line and recover, that’s when major recessions hit.
This happens when investors are more uncertain about the economic future and expect interest rates (and reinvestment rates) to go to the dumps in the near future.
Therefore, they ditch shorter-term government securities (more notably, the 3-month T-Bills) for longer-term government bonds (more notably, the 10-Year
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