The Inverted Yield Curve: Lets discuss what this means, why it’s important, and if this could predict a recession. Enjoy! Add me on Instagram: GPStephan
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Ok, lets start here: what is the yield curve
The yield curve graphs the short term bond returns with long term bond returns.
And generally speaking, the longer lend your money, the HIGHER the return you should have. This is because, long term, you might not know where the markets are heading, you aren’t sure of inflation, and there’s more to go wrong, in a sense. So because of that, you should be compensated a little more for the LONGER you invest.
However, right now, things are quite the opposite: you can get a higher return investing your money in short term bonds for just 3 months…than you can investing your money in long term bonds for 10 years. That is what’s meant by the yield curve INVERTING.
All you need to know is that when this happens, it’s used as an indicator that a recession is soon to come. This is because an inverted yield curve has correctly signaled nine recessions since 1955, with only one false positive in the 1960’s.
https://www.frbsf.org/economic-research/publications/economic-letter/2018/march/economic-forecasts-with-yield-curve/
Now…looking back all the way back to the 1960’s, when the 3 month / 10 year yield inverts for more than 10 days, it took an AVERAGE of 311 days from there to actually enter a recession. And once in a recession, it lasted - on average - of 17.5 months.
https://www.marketwatch.com/story/the-yield-curve-inverted-here-are-5-things-investors-need-to-know-2019-03-22
https://www.forbes.com/sites/cameronkeng/2018/10/23/recession-is-overdue-by-4-5-years-heres-how-to-prepare/ #700a7f4940d8
So here’s what this means, and what you should do about it.
Yes, this has predicted the last 9 recessions with one false positive…but this doesn’t ALWAYS mean it will be the case with 100% certainty, and if it IS right, we still don’t know how the market will behave and where the market will end its highs and lows. A recession could happen now, or it could happen in a year from now - the markets could go up another 15% before they decline, or they can go down 10% tomorrow….no one can predict it.
Most of this data we get is seen AFTER it’s already happened, so we can’t be completely sure what will happen in the near future to act on it with reasonable accuracy.
This leads me to my own thoughts and my own advice…and this is how I basically run my entire life:
Focus on the things you can directly control, and ignore the things you can’t.
By focusing on what you CAN control, and disregarding everything you can’t…you give yourself MUCH greater power to make the most of opportunities, LONG TERM, without concerning yourself about what the markets may or may not do in the short term.
If the markets go down - fine, that’s just part of the market cycle. Use that as an opportunity to continue buying at lower prices, knowing that long term, you’ll be ok.
If the markets continue going up - fine, that means your current investments are also going up in price.
It’s great to be aware of economics and what drives business, but at the end of the day, focus on what you can control and make sure you’re not in a position where you’ll be hurt if prices fall, so you can ride it out until it recovers.
And understand that even IN a recession, even WHEN prices drop - because they will at some point - that those are often the best opportunities to take advantage of. It should be something to embrace, not something to fear.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness @gmail.com
My ENTIRE Camera and Recording Equipment:
https://www.amazon.com/shop/grahamstephan?listId=2TNWZ7RP1P1EB
The YouTube Creator Academy:
Learn EXACTLY how to get your first 1000 subscribers on YouTube, rank videos on the front page of searches, grow your following, and turn that into another income source: https://bit.ly/2STxofv $100 OFF WITH CODE 100OFF (Limited Time Only)
Merch: http://www.GrahamStephanStore.com/
Ok, lets start here: what is the yield curve
The yield curve graphs the short term bond returns with long term bond returns.
And generally speaking, the longer lend your money, the HIGHER the return you should have. This is because, long term, you might not know where the markets are heading, you aren’t sure of inflation, and there’s more to go wrong, in a sense. So because of that, you should be compensated a little more for the LONGER you invest.
However, right now, things are quite the opposite: you can get a higher return investing your money in short term bonds for just 3 months…than you can investing your money in long term bonds for 10 years. That is what’s meant by the yield curve INVERTING.
All you need to know is that when this happens, it’s used as an indicator that a recession is soon to come. This is because an inverted yield curve has correctly signaled nine recessions since 1955, with only one false positive in the 1960’s.
https://www.frbsf.org/economic-research/publications/economic-letter/2018/march/economic-forecasts-with-yield-curve/
Now…looking back all the way back to the 1960’s, when the 3 month / 10 year yield inverts for more than 10 days, it took an AVERAGE of 311 days from there to actually enter a recession. And once in a recession, it lasted - on average - of 17.5 months.
https://www.marketwatch.com/story/the-yield-curve-inverted-here-are-5-things-investors-need-to-know-2019-03-22
https://www.forbes.com/sites/cameronkeng/2018/10/23/recession-is-overdue-by-4-5-years-heres-how-to-prepare/ #700a7f4940d8
So here’s what this means, and what you should do about it.
Yes, this has predicted the last 9 recessions with one false positive…but this doesn’t ALWAYS mean it will be the case with 100% certainty, and if it IS right, we still don’t know how the market will behave and where the market will end its highs and lows. A recession could happen now, or it could happen in a year from now - the markets could go up another 15% before they decline, or they can go down 10% tomorrow….no one can predict it.
Most of this data we get is seen AFTER it’s already happened, so we can’t be completely sure what will happen in the near future to act on it with reasonable accuracy.
This leads me to my own thoughts and my own advice…and this is how I basically run my entire life:
Focus on the things you can directly control, and ignore the things you can’t.
By focusing on what you CAN control, and disregarding everything you can’t…you give yourself MUCH greater power to make the most of opportunities, LONG TERM, without concerning yourself about what the markets may or may not do in the short term.
If the markets go down - fine, that’s just part of the market cycle. Use that as an opportunity to continue buying at lower prices, knowing that long term, you’ll be ok.
If the markets continue going up - fine, that means your current investments are also going up in price.
It’s great to be aware of economics and what drives business, but at the end of the day, focus on what you can control and make sure you’re not in a position where you’ll be hurt if prices fall, so you can ride it out until it recovers.
And understand that even IN a recession, even WHEN prices drop - because they will at some point - that those are often the best opportunities to take advantage of. It should be something to embrace, not something to fear.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness @gmail.com
My ENTIRE Camera and Recording Equipment:
https://www.amazon.com/shop/grahamstephan?listId=2TNWZ7RP1P1EB
Graham! Time to do another yield curve it happened again! But now with the fed out of tricks 😬! And inflation! And national debt, and housing market?
What say you bro?
This proved to be accurate as the recession occured in the predicted historical timeframes. Crazy.
I guess it can predict pandemics too lol
crazy watching this in 2020
Taking a shot in the dark. AAAAHHH HAA HAA!
Great advice! Obsession over the current inverted yield curve is over-hyped. My recent search indicated that for the period covering the last eight recessions, the yield curve has inverted and then reverted back to normal TWICE without a recession occurring in between ("false positives" at the end of 1989 and the end of 2007). Also, when the indicator WAS correct, the following recession arrived anywhere from one year to two years AFTER the inversion first occurred. So… If this is correct, an inverted yield curve predicts 25% MORE recessions than actually do occur, and if the current inversion is correct, it predicts that the next recession will happen somewhere between 2021 and 2022. How useful is this particular recession indicator again?
But Graham This is not similar that any since 30 years crisis. :)(
Dude, after the yield curve inverted in 1998, the recession lasted almost 3 years, starting in 2000 and bottoming out in Feb of 2003. The information in this video is wrong. Also, the s&p loses about 40 to 50 percent from its peak during most stock market drops during recession.
GZ dude 9:1 ofcourse IM gonna take my chances( !) and ever next recession is stronger then previews one!
I'm buying puts yooooooooo.
My question is, does this mean you pull out of the market? As a 21 year old, it definitely seems well below my risk tolerance, but I'm interested in how you react to this if at all.
Didn't the last recession make millions of people broke and homeless and banks werebailed out just to "save" the economy? And the market didn't recover to its previous levels for years to come? I think talking this easily about it like it's nothing and has no effect on a regular person gives a wrong impression of the seriousness. And obviously not much has been learned since the last one.
In my opinion the market at the highest level
Isn't the fixed rate mortgage really fixed for like 5 years then reviewed?
ok i liek
dude i found this channel and i fucking love u
Haha nice man. I’ve been buyin real estate for 19 years
Can you do a video on Toronto or Canada condo and house for rent with examples.
Good advice mr.graham 🙂
Graham, don't forget that in the fall of 1990, Sadam invaded Kuwait and the market took a major nose dive because of that. Then the beginnings of Operation Desert Shield began and the stock market was spooked all the way thru the beginning of 1991. Just wanted to point that out. There were more things than just economics at play during that time.
Panis time 😂😂😂
Spoken like a true Realtor… this recession will top the Great Recession… sorry you were in Middle school the last one we had but they really hurt the middle-class