The yield curve means nothing and has never predicted anything. The yield curve simply displayed in graph form that the fed had risen rates past the expected ten year rate. The front part of the curve is controlled by the fed. And the back part by the market. When the market was convinced that the Fed was going to cause a recession, the market would start buying ten year bonds causing the ten year yield to go down. That is not what is happening today.
Today the Fed has a strong market. Which is an island in an ocean of weak markets. The ten year is not moving because of the Fed. Its moving because the rest of the world is forcing down their interest rates. The current interest rates are historically very low. And the US economy is growing faster than all the other major 1st world economies.
The reason the market is spooked by an inverted yield curve has to do with computer traders that have inverted yield as a strong sell sign. Even though all the data says that the US will chug along at 2.5%, these computer traders will panic sell every time the yield inverts. Its just easy for a computer to see an inverted curve. That’s why they have it programmed in.
The reality is that the world is in a depression. The major first world economies have created too much debt. And now they are devaluing their currency slowly at the same time. As long as the world devalues together, there is no adverse affect. The result is only that the debt gets monetized. No smaller currency like the Swiss Franc can afford to be out of step with such huge currencies as the Euro, Yen and Dollar together.
You have nothing to be afraid of. The Fed has a put on the market. But even still, there will be less growth. And if you think the world is coming to an end, then watch the US GDP. If it goes negative and the Fed can’t fix it. Then the world will be in depression for a while. Hold cash.
I appreciate your take. Most impressive.