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  • Writer's pictureC Garrett Moore, CFP®

Yield Curve Inversions & You

Updated: Apr 4, 2020

You may have recently heard the phrase on your favorite news channel or website.

The Yield Curve Has Inverted!!!

The what? It’s upside down? Can we flip it back over?

What It Means

When you borrow money, you will generally pay a higher interest rate the longer you want to borrow it for. This makes logical sense.

When the “yield curve is inverted”, it means that you will pay a lower interest rate to borrow money for a longer period. This doesn't make logical sense.

Why It Might Matter

When this has occurred the past 40 or so years, a recession followed within approximately 1 year, 9 out of 10 times.

Thusly, the U.S. stock market is reeling, dropping 3% this Wednesday.

Devil's Advocate

Do you know how many times it has dropped 3% or more in a single day, during the last 100 years? 307. Three hundred and seven times.

What Should I Do?

As is always my opinion, you cannot profit, or prevent losses, from such events by trying to trade around them. Trying to do so will likely result in the “Behavior Gap”, eloquently illustrated by Carl Richards below.

Want to talk about it?

Call me: 941.544.2269.

Text me: 941.877.6011.


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