The Fed's "One Weird Trick"

6.28.23 - The Fed's "One Weird Trick"

Gold last traded at $1,910 an ounce. Silver at $22.75 an ounce.

A recession indicator that predicted every downturn since 1969 started flashing months ago-and a Wall Street veteran warns it always works on a delay -Yahoo! Finance

Will we officially be in a recession by October? All indicators point to 'yes'. It's hard to ignore the signs of a downtrend ahead any longer. The best preparation? A well diversified portfolio including tangible assets, like precious metals; and a healthy dose of hope and patience while weathering the storm.

Wall Street analysts and investment strategists love to use "recession indicators." These simple statistics that serve as evidence of (potential) impending economic disaster can be invaluable tools for managing risk. Just look at one of the most famous of them all: the yield curve. Since 1969, a yield curve inversion has preceded every U.S. recession.

The yield curve is a graphical representation of the relationship between the yields of related bonds-most commonly the U.S. 10-year Treasury and two-year Treasury. Typically, shorter-term bonds have lower yields than longer-term bonds because investors are taking more risk by locking up their money for longer. This relationship is represented by an upward sloping curve. But sometimes that yield curve can invert, meaning long-term bond yields drop below short-term bond yields.

Megan Horneman, chief investment officer at Verdence Capital Advisors, warned Monday that even after nearly a year, investors shouldn't be "complacent" about this "historical recession indicator."