As the economy continues to face uncertainty and volatility, many experts are keeping a close eye on key indicators that may signal an impending recession. One such indicator that has caught the attention of economists and investors alike is the inverted yield curve.
An inverted yield curve occurs when short-term interest rates are higher than long-term interest rates. This phenomenon has historically been a reliable predictor of economic downturns. In fact, an inverted yield curve has preceded every recession in the United States since 1955.
The reason why an inverted yield curve is such a powerful signal of a looming recession is that it reflects investor pessimism about the future health of the economy. When investors are more willing to lend money over the long term at lower interest rates than over the short term, it indicates a lack of confidence in the economy’s growth prospects.
Currently, the yield curve has been flattening, with short-term rates rising and long-term rates falling. This has raised concerns that an inversion may be on the horizon, potentially signaling an economic slowdown.
Some economists argue that this time may be different, as central banks around the world have taken unprecedented steps to stimulate economic growth. However, historical data shows that an inverted yield curve has never failed as a predictor of recessions.
Investors and policymakers are now closely monitoring the yield curve as they assess the health of the economy. While an inverted yield curve may not guarantee a recession, it is certainly a red flag that should not be ignored.
In conclusion, the inverted yield curve has proven to be a reliable indicator of impending recessions throughout history. As the yield curve continues to flatten, it is important for investors and policymakers to take this signal seriously and prepare for any potential economic downturn that may lie ahead.
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This time is different. Nothing to see here. Going back to party.
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How can I safeguard my investment portfolio of around $2M in stocks amidst the economic firestorm? What's the most effective strategy to reallocate funds in my portfolio to hedge against downturns?
The M2 money supply went up after Oct 2023. We are so back
I find it puzzling that we hear predictions of a stock market crash while also receiving advice on investing in it. Is this an oxymoron or a paradox? I'm contemplating investing over $300k but am unsure about effective risk mitigation strategies.
Thanks
Since the USA federal government agencies, as well as the USA federal reserve, have been fudging the statistics for months it's highly likely we are in a recession, and headed down hill for more bad news.
So I lost everything in the 08 crisis but it wasn't in 08,it was 2011, it takes time ,slowly this will continue to get worse and worse ,prepare
I'm 44 and earn about $250k annually, only save 30% in HYSA's. I've been reading a lot of articles mentioning how worthless 'cash savings' are in this current unstable economy, so I intend diversifying my portfolio. Do you suggest I invest in real estate, stocks or Gold?
Thanks Mate, the sad truth is that no one has a clue, we all react to what happens as it happens and try to analyse it but can’t predict an iota of what is going to unfold in the markets… content creators are like amplifiers, when times are good they affirm it and try to tell you why it’s good and that it’s looking bullish but then all of a sudden the market turns bearish and everyone affirms it again and try to analyse why… it’s so sad that many are so powerless and it's not about guessing the market's next move; it's about playing it smart and steady during trading…managed to grow a nest egg of around 2.3Bitcoin to a decent 19Bitcoin in the space of a few months… I'm especially grateful to Kerrie Farrell, whose deep expertise and traditional trading acumen have been invaluable in this challenging, ever-evolving financial landscape…
You triggered an idea for trading the vix, thank you!
It has not happened because a lot of people are expecting it.
I might have jumped the gun because Im already in an 3x SP500 short. 50% pull back would be awesome 🙂
The money has been transferred to the top riches using fed as a tool
Black swan is coming, black swan is coming!
You're just sooooo constantly wrong bro
Inflation is still too high right now, so short-term rates should remain elevated for a while. The FED might lower rates later this year if we actually do go into a recession, but I'm not holding my breath.
It only hasn't happened because the dollar is completely fake money. Nothing is stopping me from taking a piece of paper, writing the word 1.000.000$ on it with crayon, and telling myself I'm suddenly rich: Only difference between me and the government is one of us will be considered insane while the other can convince an entire world to go with it.
You should do a video to address new movie "Finding the Money" by Stephanie Kelton
recession does not always = price down. but whatever buy his masterclass lol
The ironic part of the bank assessment of inflation risk of a long term loan is that they are creating money out of thin air to make that loan, which is inflationary. But anyway, I wouldn't expect an recession until after the rates un invert after being inverted. The rates are inverted and have not done the un inverted part yet.
Coinbase is the hidden economy.
Modern day Babylon
Gr8 explanation!
1966. Inversion and no recession.
I think it’s inaccurate to say the Fed doesn’t control long term rates. In fact, the Fed has manipulated long term rates for nearly two decades through quantitative easing, and now quantitative tightening. By selling long term debt while purchasing short term debt, the Fed can steepen the curve. And the buying of long term debt it can invert the curve. The make up of the treasury auctions can also affect the curve. Because the US Treasury is the biggest player in the debt markets.
Historically recessions following inverted yield curves come only after the curve steepens. Months after. I think the market is so distorted because of the magnitude of current new debt and decades of manipulation, it’s hard to understand the actual market signals. We are probably in the later stages of the business cycle. How the explosion of sovereign debt influences the future is unpredictable. Because a hiccup in the treasury market will surely trigger the Fed to add liquidity. .
Hey Joe let me get a video request. Can you do a video on front running?
Bruh, I just overlayed that 3 month yield over the 10 yr and what jumped out in my face looking back in time was anytime the 3 month jumped up, life sucked the worst. When it dumped things got affordable again, jobs disappeared. Flatlined times were stable times. I can literally plan my life around that 3 month yield
real_rate = (nominal_rate – inflation) is a lie, esp. when rates and inflation are high. When rates are at 8% and inflation at 5%, your real rate is 1.08/1.05 = 1.02857 (2.857%); when rates are at 28% and inflation is at 25%, your real rate is 2.4%, not 3%