September 21, 2022, 11:21 am EDT
A Negative Yield Curve Means A Big Trouble
When short-term yield (2-year treasury) pays higher interest than a longer-term yield (10-year treasury), it means big trouble for the economy. It indicates either red-hot inflation for now or a dismal outlook for economic activity. Furthermore, it could mean both conditions come together that is exactly what we have today.
In our 07/07 article, we pointed out the significance of the inverted yield curve in April and July 2022. At that time, 10-year-treasury subtracted 2-year treasury barely touched the zero line. But, this line is now deeply into the negative area of -0.39% as shown.
It does not matter whether the Fed will raise the rates by 0.75% or 1% today because the damage is already done that deep recession is coming the way.
We believe the stock market would go much lower from today’s level in the next 6-12 months.