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recently stock market plummed.(1) what is the yield curve inversion? (2) what does it indicate? (3)...

recently stock market plummed.(1) what is the yield curve inversion? (2) what does it indicate? (3) how many times does the US stock market witness the yield curve inversion? (4) any other things


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Answer #1

1.An inverted yield curve is an interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the same credit quality

2.It is considered to be a predictor of economic recession.Historically, inversions of the yield curve have preceded many of the U.S. recessions. Due to this historical correlation, the yield curve is often seen as an accurate forecast of the turning points of the business cycle.

3. US stock market witnessed the yield curve inversion on below occasions

Date of Inversion Time to Recession

11 April 1968

 19 months
March 9, 1973 7 months
August 18,1978 16 months
September 12,1980 9 months
December 13 ,1988

18 months
Feb 2, 2000 12 months
June 8,2006 17 months

Currently it was witnessed in late 2018.

4.The timeline between inversion and economic slowdowns are not instantaneous.

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