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Lions and Tigers and Yield Curve Inversions. NEW POST. $SPX $TNX

pensionpartners.com/lions-and-tige…
In December 2018, part of the yield inverted for the first time since 2007. At month-end, the 6-month Treasury bill yield stood at 2.56%, 5 basis points higher than the 5-year yield (2.51%).
Naturally, many investors are afraid, with 45% predicting an imminent recession in a recent poll…
Is this a reasonable expectation? Let’s take a look at the last 3 times the yield curve inverted in a similar fashion (6-month higher than 5-year) after a long period with a positive slope…
1) Dec 2005: yield curve inverted, first time since 2000. S&P ends month at 1,248. What happened next?

S&P continued to rally for another 22 months, rising over 26% b/f peaking in Oct 2007 at 1,576.

Expansion continued for another 24 months b/f the recession began in Dec 2007.
2) Aug 1998: yield curve inverted, first time since 1989. S&P ends month at 957. What happened next?

S&P continued to rally for another 19 months, rising over 62% b/f peaking in Mar 2000 at 1,553.

Expansion continued for another 31 months b/f the recession began in Mar 2001.
3) Mar 1989: yield curve inverted, first time since 1981. S&P ends month at 295. What happened next?

S&P continued to rally for another 16 months, rising over 25% b/f peaking in Jul 1990 at 369.

Expansion continued for another 16 months b/f the recession began in Jul 1990.
Lesson: yield curve is a long leading indicator, and in the last 3 cycles it took between 16 and 31 months after 5-yr/6-month inversion for a recession to start and between 16 and 22 months for the stock market to ultimately peak...
Does it have to take take that long?

No - there are no hard and fast rules in investing. Every cycle is different and just because something hasn’t happened in the past doesn’t mean it can’t happen in the future...

pensionpartners.com/lions-and-tige…
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