Inverted Yield Curve: Definition, What It Can Tell Investors, and Examples

[IroNat]

https://www.currentmarketvaluation.com/models/yield-curve.php

Yield Curve Inversion suggests that the US recession risk is Very High

https://www.investopedia.com/terms/i/invertedyieldcurve.asp

What Is an Inverted Yield Curve?

An inverted yield curve shows that long-term interest rates are less than short-term interest rates. With an inverted yield curve, the yield decreases the farther away the maturity date is. Sometimes referred to as a negative yield curve, the inverted curve has proven in the past to be a reliable indicator of a recession.

Key Takeaways

The yield curve graphically represents yields on similar bonds across a variety of maturities.
   
An inverted yield curve occurs when short-term debt instruments have higher yields than long-term instruments of the same credit risk profile.
   
An inverted yield curve is unusual; it reflects bond investors’ expectations for a decline in longer-term interest rates, typically associated with recessions.
   
Market participants and economists use a variety of yield spreads as a proxy for the yield curve.

[sync pulse]

So wait 6 months after the market tanks then start to drop money into Long Positions every month(Where you make a profit when the market finally goes up)?

Edit: People here don't know what short and long means in the stock market.

[IroNat]

So wait 6 months after the market tanks then start to drop money into Long Positions every month(Where you make a profit when the market finally goes up)?

Edit: People here don't know what short and long means in the stock market.

The market fairly valued would have the S&P 500 Ratio around 15.

Right now it is 25.

So, based on that the S&P 500 is 166% overvalued and you are overpaying to currently buy the Index.

However, the S&P 500 could go to 200% overvalued in the near future...or drop to 100% or less.

Eventually the Index will drop to 15.  It always has.  The exact "when" is unknown but it will happen.

How much risk you are willing to take depends on how soon you need your money.

I think the best idea is to consider if you can withstand a 50% market drop in your equity values.

If you can then no problem to stay invested.  If not, then you should adjust your positions to where you can withstand such a drop.

Just like gambling.  Don't bet more than you can afford to lose.

(Cash and Cash Equivalents + Bonds) + 1/2 Equities = Safe Zone for Black Swan Event

You can be 100% Equities as long as you can withstand a 50% loss.

A Black Swan Event usually is what leads to a crash. 

Unfortunately, no one sees the actual Black Swan Event until it's too late.

https://www.multpl.com/s-p-500-pe-ratio

[SOMEPARTS]

Market is due for at least a 40% correction. The rise is basically due to 7 tech stocks, the rest of the S&P 493 is down slightly.

[IroNat]

This predictive tool has been flawless for more than a half-century

https://finance.yahoo.com/news/recession-predicting-tool-hasnt-wrong-100600069.html

10 Year-3 Month Treasury Yield Spread

https://ycharts.com/indicators/10_year_3_month_treasury_spread

The 10 Year-3 Month Treasury Yield Spread is the difference between the 10 year treasury rate and the 3 month treasury rate. This spread is widely used as a gauge to study the yield curve. A 10 year-3 month treasury spread that approaches 0 signifies a "flattening" yield curve. Furthermore, a negative 10 year-3 month spread has historically been viewed as a precursor or predictor of a recessionary period. The New York Fed uses the rate in a model to predict recessions 2 to 6 quarters ahead.

[Flexacon]

Fellas do not wait for a 40% correction next year. Barring a genuine black swan like a full blown war with China or an alien invasion it won't happen.

It's an election year and any market correction (very likely) will be met with pressure on the FED to turn on the money printer. It's just gonna be another can kick.

[IroNat]

Fellas do not wait for a 40% correction next year. Barring a genuine black swan like a full blown war with China or an alien invasion it won't happen.

It's an election year and any market correction (very likely) will be met with pressure on the FED to turn on the money printer. It's just gonna be another can kick.

Good point.

[SOMEPARTS]

Fellas do not wait for a 40% correction next year. Barring a genuine black swan like a full blown war with China or an alien invasion it won't happen.

It's an election year and any market correction (very likely) will be met with pressure on the FED to turn on the money printer. It's just gonna be another can kick.

Probably going to kick the can until they can drop a depression on Trump in '25. The Piper WILL be paid though.