Predictors of the next recession: Inverted yield curve?

Posted By on June 26, 2018

How does on plan for the flattening yield curve – or even inversion (spread between 10-yr and 2-yr Treasury Bonds)?

Barron’s – June 2018:

“Inversion has an amazing record of forecasting recession…but stocks have typically continued to rise (sometimes sharply) after the inversion with a median gain of 13.1%.…Bottom line: the flattening yield curve is not a reason to flee stocks.”
— Bill Stone, Chief investment officer, Stone Investment Partners

“Although many fear [financials] may underperform…the history of the past two cycles suggests otherwise. We would add to our overweight sectors of financials, info tech and industrials with an intermediate-term time horizon.”
— Tony Dwyer, Analyst, Canaccord Genuity

“Contrarian investors should take a look at interest-rate sensitive defensive sectors like utilities, stables and real-estate investment trusts, which may gain their footing as growth momentum peaks.…”
— Michael Darda, Chief economist & market strategist, MKM Partners

“We still think it is too early to go full-on defensive, but it probably is not too early to start shifting out of some of the extreme cyclicals and picking up a few more defensively oriented names.”
— Michael J. Wilson, Equity Strategist, Morgan Stanley

Comments

Desultory - des-uhl-tawr-ee, -tohr-ee

  1. lacking in consistency, constancy, or visible order, disconnected; fitful: desultory conversation.
  2. digressing from or unconnected with the main subject; random: a desultory remark.