Record Inverted Yield Curve Promises a Recession

Contact Your Elected Officials

A number of financial experts are sounding alarms forewarning of a recession and related stock market crash set to hit before the 2024 election. A stock market โ€œcorrectionโ€ of over 50% has only occurred 3 times previously where the market had to fall 50% of its current value to correct itself to a more appropriate value.

Today investors use the โ€œinverted yield curveโ€ to predict an impending recession leading to a major stock market correction. In brief, when a 2-year Treasury yield eclipses the 10-year Treasury yield (meaning short term investments are better than long term) you have an inverted yield curve, in other words, trouble is brewing. Bidenomics has created increased lender risk whereby the Federal Reserve might have to make a monetary intervention. The Federal Reserve can only influence short term interest rates such as 2-year T-bill rates and not the longer term of 10 years.

We have seen six major US recessions since 1976, as per the National Bureau of Economic Researchโ€™s definition (NBER). Today, Monday May 13th, is day 680 of this observation occurring which is historic according to the previous 6 times it happened.

Inversion BeganRecession BeganDays Total
August 17th, 1978February 1st, 1980534
September 12th, 1980July 1st, 1981293
December 13th, 1988July 1st, 1990566
February 2nd, 2000March 1st, 2001394
December 27th, 2005December 1st, 2007705
August 27th, 2019February 1st, 2020159
April 1st, 2022Recession Not Declared Yet 

Source: (https://get.ycharts.com/resources/blog/inverted-yield-curve-what-it-means-and-how-to-navigate-it/)

This current yield curve inversion caught many investors attention in 2022. The website Investopedia offers this explanation as to why this is important to them:

โ€œHistorically, protracted inversions of the yield curve have preceded recessions in the United States. An inverted yield curve reflects investorsโ€™ expectations for a decline in longer-term interest rates as a result of a deteriorating economic performance.โ€

And as to why investors compare 10 and 2 year treasury bonds:

โ€œMany investors use the spread between the yields on 10-year and 2-year U.S. Treasury bonds as yield curve proxy and a relatively reliable leading indicator of a recession in recent decades. Some Federal Reserve officials have argued that a focus on shorter-term maturities is more informative about the likelihood of a recession.โ€

Source: (https://www.investopedia.com/terms/i/invertedyieldcurve.asp)

Sunday, Fox had private equity fund manager Grant Cardone offering his warning to Americans about their retirement savings on โ€œThe Big Money Showโ€.

 โ€œHIGH โ€˜RISKโ€™: US families in jeopardy amid rare market scenarioโ€ โ€“ Fox Business

What he had to say in his advisement is noteworthy to every American holding long term investments they hope will carry them into and through retirement.

Finally, it is important to note that not all recessions lead to a major decline in the stock market but when a market correction of more than 50% occurs, some argue that is not a correction at all but rather  a โ€œcrashโ€ and the pain on investors is significant. This is what investors fear is about to occur.

CONCLUSION:

We at โ€œThe Thinking Conservativeโ€ have been reviewing this scenario for a long time now. It is very concerning for those who are retired or close to retired as the threat is now publically out there that the older Americans could outlive their retirement savings or nest egg.

 This could prove to be devastating to the pension retirement savings of many average Americans depleting their earnings as much as 50% in a pullback. Some 38 trillion dollars are now sitting in retirement accounts.

Just last month a report was released that the American stock market is overvalued by as much as 65%!

โ€œThe American stock market currently appears to be overvalued by 65%. In other words, it would take a 39% drop to bring the market back to its long-run equilibrium level. At the last all-time high, on November 8, 2021, the market was 76.6% overvalued.โ€

Readers may wonder what the tie is between the stock market and interest rates on treasury bonds.

โ€œIs the stock market going to crash soon by 50% when the inverted yield curve reverses course?โ€ โ€“ Edward Ph.D.

Both Grant Cardone and Dr. Edward of two of the videos in this article note that the historic phenomena we are now witnessing has only occurred 3 times previous in 1929, 1974, and 2008 where the inverted yield curve led to a stock market decline of more than 50%. Dr. Edward does not seem to be a big fan of Cardone but both of these thoughtful men give one cause to pause and think. In brief, Cardone seems to want people invest in property while Dr. Edward seems to lean towards precious metals.

Whether this becomes โ€œanother brick in the wallโ€ relative to abandonment and isolation by the rich to the poor or โ€œthe last nail in the coffinโ€ for Joe Bidenโ€™s political career brought on by himself remains to be seen. Many have been sounding the alarm for a long time that Americaโ€™s โ€œMiddle Classโ€ is being wiped out!

Overall, things are not looking good for the Democrats in 2024 as the snowball rolling down the hill is gaining speed and size coming right at them!

You may also want to read:

โ€œAre Predicted Bank Failures in Bidenomics?โ€ by Mark Schwendau

Copyright ยฉ 2024 by Mark S. Schwendau

Mark Schwendau
Mark Schwendauhttps://www.idrawiwrite.tech/
If there is a "CONSPIRACY" THEORY Mark Schwendau won't miss out telling you about it. He is a retired college technology educator and author in Illinois. He holds a BS degree in technology education and a MS degree in industrial management. He has had news articles published in online news journals such as Communities Digital News and Independent Sentinel. His opinions are his own as assured by the First Amendment of the Constitution.

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