How The Yield Curve Predicted Every Recession For The Past 50 Years

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The yield curve was once just a wonky graph for academics and policymakers. But in recent years it has become a way to forecast looming recessions. The curve has helped predict every recession over the past 50 years. That means the curve accurately predicted even largely unforeseen downturns like the dot-com bubble of 2001 and the Great Recession in 2007.

As a result, news of yield curve inversions can now send markets tumbling. Policymakers keep a close eye on even small changes in the curve’s composition.

So how did this simple graph showing U.S. Treasury bond interest rates grow into one of the most reliable recession indicators we have? And what does a yield curve inversion really mean?

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How The Yield Curve Predicted Every Recession For The Past 50 Years

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21 COMMENTS

  1. My take away is that we’re probably living in a time now with extreme technology that’s driving our markets so any recession would be artificial at this point … almost like a controlled crash to re-stimulate

  2. I am regretting not investing in stocks ever since but still grateful i kept money in the money market. With about $200k maturing soon, i plan investing in the stock market. What stocks should I look into as a newbie to safely grow my money?

  3. I used to believe that everyone loses during a recession, but some make millions. Similarly, I thought everyone went out of business in the Great Depression, but some started new ventures. In short, tough times bring losses for some and profits for others, all rooted in the right mindset. Now, I've saved $220k for the future, even though I'm a complete beginner.

  4. Things are strange right now. The US dollar is becoming less valuable because of inflation, but it's getting stronger compared to other currencies and things like gold and property. People are turning to the dollar because they think it's safer. I'm worried about my retirement savings of about $420,000 losing value because of high inflation. Where else can we keep our money?

  5. With all of the current events, what is the best approach to profit from the present market? I'm still debating diversifying my $400k stock portfolio to obtain some profits while minimizing risk.

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  7. We all know that prices of almost everything aren’t coming down. Simply put, they're rising less. Costs are rising due to rising inflation. As we are evidently at the verge of hyperinflation, with the less haves bearing the brunt of the burden. I'm more concerned that the rising inflation may lead my entire $990k retirement funds to lose value. Where else could we put our cash?

  8. Prominent market analysts have been articulating their assessments regarding the potential severity of the impending economic downturn, juxtaposed with the persistent elevation of inflation beyond the Federal Reserve's established 2% benchmark. In pursuit of my goal to cultivate a portfolio with a minimum valuation of $850,000 by the time I reach the age of 60, I cordially seek informed recommendations with regard to prudent investment choices. Your insights and expertise in this matter would be greatly appreciated.

  9. In light of the ongoing global economic crisis, it is crucial for everyone to prioritize investing in diverse sources of income that are not reliant on the government. This includes exploring opportunities in stocks, gold, silver, and digital currencies. Despite the challenging economic situation, it remains a favorable time to consider these investments.

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