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How Worried Should You Be About A Yield Curve Inversion?

Published Thu, 06 Dec 2018 10:31:22 -0500 on Seeking Alpha

We would like to preface this article by saying that while the analysis of markets is a multi-faceted and multi-dimensional study, this article will examine simply one of those dimensions: the yield curve and its correlation/impact on financial markets. As such, this analysis isn't the answer to the market riddle, but rather an important piece in the much larger market puzzle.
Over the past several months, the financial markets have dealt with multiple headwinds and concerns which presently leave the S&P 500 up just 2% on the year, versus a 90-year average annual gain of 10%. The most recent of these market headwinds is a potential yield curve inversion, which economists and market observers look at as a harbinger of a recession (a yield curve inversion has correctly predicted every U.S. recession since 1950).
Our research indicates that while a yield curve inversion is a harbinger of bad news for financial markets, it isn't the doomsday scenario that many market observers think it to be. During prior major yield curve inversions in the era of the digital economy (post-1985), a yield curve inversion has correctly predicted a market top, but not with perfect timing. Each time the yield curve has inverted since 1980, the S&P 500 rallied meaningfully in the several months following the inversion, and often rallied for more than a year. Instead, the true predictor seems to be when a negative 10-2 Treasury Yield Spread starts to move up, as this dynamic has... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
SPDR S&P 500 ETF 292.36   0.0 0.00 5.42 1.87
PROSHARES ULTRASHORT S&P 500 30.82   0.0 0.00 0.00 1.86

SPDR S&P 500 ETF - SPY
SPDR S&P 500 ETF - SPY  


Older articles featuring Spdr S&p 500 Etf (SPY):
How To Retire: Eat Dividends For Breakfast
Weekly Review: High-Yield CEFs - Recession Signal In Focus
With Treasury Yields Tanking, The Japanese Yen May Be A Better Hedge For Stocks
Pay Attention To The Message The Yield Curve Is Sending
Weighing The Week Ahead: Yield Curve Inversion And The Jackson Hole Agenda
Weekly Review: High-Yield CEFs - Negative Performance For The Sector
Weekly High Frequency Indicators: Corporate Bond Yields Make Another New Expansion Low
P/E Ratios And Yields By Country
Weekly Review: High-Yield CEFs - The Trade War Is Again On Focus
Defensive Alpha With The BlackRock Enhanced Equity Dividend Fund

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