The #invertedyieldcurve is the latest brick built into the wall of worry which is great for this bull market. While it has foreshadowed every recession in post WWII experience, during the 50 years ended in the Roaring 20’s, the yield curve was inverted more than 60% of the time.
The average inversion during the 50 years ended 1929 was 100 basis points, with the steepest occurring during periods of very strong growth. Short rates averaged 4.9%, and long rates 3.9%.
We have been expecting this flat to inverted yield curve for some time, thanks to good deflation and strong unit growth associated with disruptive innovation. The last time the economy experienced this kind of deflationary boom was in the 50 years which ended in the Roaring 20’s
Then, electricity, telephony, and the internal combustion engine were the disruptive innovations. Today, the five major innovation platforms are DNA sequencing, robotics, energy storage, AI, and blockchain technology.
Check out ark-invest.com for our thoughts on the relationship between disruptive innovation and inverted yield curves.
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