Cortopassi wrote: ↑
Thu Mar 16, 2023 7:23 am
vnatale wrote: ↑
Wed Mar 15, 2023 10:30 pm
ppnewbie wrote: ↑
Wed Mar 15, 2023 10:28 pm
ppnewbie wrote: ↑
Fri Mar 03, 2023 12:11 pm
I've been buying max duration LTT's at the moment. I am going with the thesis that the yield curve inversions are telling us something significant.
I repeat the inverted yield curve is telling us the world may be about to implode.
How many other times was it implying the same and how many of those times did the world implode?
Many others, but here is one chart showing recessions have always followed inversions, without fail seemingly.
https://www.currentmarketvaluation.com/ ... -curve.php
Many thanks for that. Extremely informative.
Here are the key portions I found in it:
****The US Treasury Yield Curve is currently inverted, meaning short term interest rates are moving up, closer to (or higher than) long term rates. This unusual occurrence, called a yield curve inversion, has historically been a very reliable indicator of an upcoming economic recession. Since World War II every yield curve inversion has been followed by a recession in the following 6-18 months, and recessions are naturally correlated with decreased stock market returns.
****Yield inversion is the term used when long term rates are lower than short term rates. This happens when investors are nervous about the future and expect short term rates to fall. When so many investors think rates are going to fall, they will crowd into the longer-dated bonds to try to lock in the 'high' rate for as long as possible.
****Inverted yield curves are very rare, occurring only once a decade or so, and almost always immediately before a recession.
****Again, in a normal rate environment the 10-year rate is much higher than the 3-month rate, so this spread will be a positive number. As the spread moves closer to zero, and as it turns negative, it reflects the 10-year rate falling below the three month rate, indicating that investors expect future economic slowdown in the near term. As you can see by the shaded recession areas, investors have almost always been correct in this prediction. For the last 50 years, every yield curve inversion has been soon followed by economic recession.
****The New York Federal Reserve uses the yield curve to calculate the probability that the US economy will be in a recession in 12 months. (Note: the calc is whether or not there we will be in a recession 12 months from the time of the calculation, not anytime in the subsequent 12 months). Currently, the NY Fed assigns a 57% probability that the US will be in a recession in Q1 2024.
****Clearly, you can see strong correlation where periods of inversion tend to precede stock market devaluations.
In sum there seems to be a strong correlation. However, it seems to not be a precise predictor? E.G., "following 6-18 month" and "assigns a 57% probability".
Also if one takes this as a signal to decrease equity investment .... what are the counter-signals to now increase equity investment?
I always come back to this whenever there is a recommendation to either get out of equity investments or decrease the amount of investment in them.
https://www.forbes.com/sites/simonmoore ... 8a3e2c7f89
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