2/10 year yield curve has inverted what now?

Yields on long maturity bonds are driven by future growth and inflation expectations. When bond yields of different maturities are plotted on a curve they depict term structure of interests rates.
Investors fear a behind the curve FED will tighten policy aggressively causing a recession. Fed funds futures expiring Dec 2022 is pricing in more than 200(2 percent) points rate increases by year end.

 

 

 

 

When the curve inverts it’s a signal of a recession. 2/10 year yield curve has successfully predicted the past USA recession. The recession occurs 18-24 months after the curve inverts.

The curve inverts when short maturity bond yields rise faster than long maturity bonds. In a matter of months we will have a recession and stock and commodities will peak.

Hold defensive sectors stocks like consumer staples, Healthcare and utility. Especially those with solid balance sheets and solid earnings per share growth rates.