What Is An Inverted Yield Curve And How Does It Affect The Stock Market? | NBC News Now
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What Is An Inverted Yield Curve And How Does It Affect The Stock Market? | NBC News Now


WHAT THE HECK DOES THAT MEAN AND WHY DID IT DRIVE THE DOW WHY DID IT DRIVE THE DOW HUNDREDS OF POINTS LOWER? HUNDREDS OF POINTS LOWER? ALI VEL CHEE IS HERE NOW. ALI VEL CHEE IS HERE NOW. FUN CATCH PHRASES LIKE YIELD FUN CATCH PHRASES LIKE YIELD CURVE INVERSION. CURVE INVERSION.>>WE DON’T GO OUT OF OUR WAY AS>>WE DON’T GO OUT OF OUR WAY AS BUSINESS REPORTERS TO SAY THINGS BUSINESS REPORTERS TO SAY THINGS LIKE THAT TO PEOPLE. LIKE THAT TO PEOPLE. THAT’S THE KIND OF STUFF THAT THAT’S THE KIND OF STUFF THAT TYPICALLY WOULD BORE SOMEONE. TYPICALLY WOULD BORE SOMEONE. BUT THE YIELD CURVE IS A SIGNAL BUT THE YIELD CURVE IS A SIGNAL THAT RECESSION COULD BE COMING. THAT RECESSION COULD BE COMING. ONE HAS PRECEDED EVERY ONE HAS PRECEDED EVERY RECESSION. RECESSION. IT’S NOT A PRECONDITION FOR A IT’S NOT A PRECONDITION FOR A RECESSION BUT IT’S A SIGN. RECESSION BUT IT’S A SIGN. THE YIELD CURVE IS THE CHART. THE YIELD CURVE IS THE CHART. LOOK AT THE FACT THAT IT DIPS LOOK AT THE FACT THAT IT DIPS BEFORE EVERY RECESSION. BEFORE EVERY RECESSION. SOMETIMES IT’S 10, 12, 18, 20 SOMETIMES IT’S 10, 12, 18, 20 MONTHS BEFORE THE RECESSION BUT MONTHS BEFORE THE RECESSION BUT IT’S A SIGNAL. IT’S A SIGNAL. THE SHORT EXPLANATION IS THERE’S THE SHORT EXPLANATION IS THERE’S NO PAYBACK FOR INVESTING IN NO PAYBACK FOR INVESTING IN BONDS RIGHT NOW. BONDS RIGHT NOW. IT’S A SIGNAL THERE’S A LOT OF IT’S A SIGNAL THERE’S A LOT OF FEAR, PEOPLE ARE LEAVING THE FEAR, PEOPLE ARE LEAVING THE STOCK MARKET. STOCK MARKET.>>THE LAST TIME WE SAW A YIELD>>THE LAST TIME WE SAW A YIELD CURVE INVERSION WAS 2007. CURVE INVERSION WAS 2007. WHEN WE SAY, THOUGH, THE YIELD WHEN WE SAY, THOUGH, THE YIELD CURVE IS CORRECT AND IT IS CURVE IS CORRECT AND IT IS INDICATING A RECESSION, IT INDICATING A RECESSION, IT DOESN’T MEAN TOMORROW THAT WE’RE DOESN’T MEAN TOMORROW THAT WE’RE IN TROUBLE. IN TROUBLE.>>NO.>>NO. IN FACT, THE AVERAGE IS ABOUT 22 IN FACT, THE AVERAGE IS ABOUT 22 MONTHS. MONTHS. HERE’S THE PROBLEM. HERE’S THE PROBLEM. WE’RE TEN YEARS AND I DON’T KNOW WE’RE TEN YEARS AND I DON’T KNOW HOW MANY MONTHS INTO AN HOW MANY MONTHS INTO AN EXPANSION. EXPANSION. THE LONGEST ONE WE’VE HAD WAS 10 THE LONGEST ONE WE’VE HAD WAS 10 YEARS AND 6 MONTHS IN THE ’90s. YEARS AND 6 MONTHS IN THE ’90s. WE’RE DUE FOR A RECESSION BUT WE’RE DUE FOR A RECESSION BUT SUGGESTING ONE COULD BE COMING SUGGESTING ONE COULD BE COMING IN 18-20 MONTHS IS NOT IN ITSELF IN 18-20 MONTHS IS NOT IN ITSELF UNUSUAL. UNUSUAL. IT’S THE OTHER THINGS, IT’S THE IT’S THE OTHER THINGS, IT’S THE TRADE WAR. TRADE WAR. IT’S MESSY AND INVESTORS DON’T IT’S MESSY AND INVESTORS DON’T LIKE MESSY. LIKE MESSY. WHEN YOU COMBINE MESSY WITH WHEN YOU COMBINE MESSY WITH FALLING INTEREST RATES AND WITH FALLING INTEREST RATES AND WITH THIS YIELD CURVE WITH THE FACT THIS YIELD CURVE WITH THE FACT THAT PEOPLE DON’T KNOW WHAT THE THAT PEOPLE DON’T KNOW WHAT THE POLICY IS GOING TO LOOK LIKE POLICY IS GOING TO LOOK LIKE WITH CHINA, YOU PUT THAT ALL WITH CHINA, YOU PUT THAT ALL TOGETHER, PEOPLE SAY, I’M GOING TOGETHER, PEOPLE SAY, I’M GOING TO INVEST IN BONDS NOT STOCKS, TO INVEST IN BONDS NOT STOCKS, THEY’RE LESS RISKY. THEY’RE LESS RISKY.>>ARE THERE INDICATIONS THAT>>ARE THERE INDICATIONS THAT MAYBE THE YIELD CURVE COULD BE MAYBE THE YIELD CURVE COULD BE COMPLETELY WRONG BECAUSE A LOT COMPLETELY WRONG BECAUSE A LOT OF PEOPLE THINK OUR ECONOMY OF PEOPLE THINK OUR ECONOMY LOOKS PRETTY GOOD IN SPITE OF LOOKS PRETTY GOOD IN SPITE OF THOSE GLOBAL ISSUES. THOSE GLOBAL ISSUES.>>WE’RE ALREADY IN A SLOWDOWN>>WE’RE ALREADY IN A SLOWDOWN OF SORTS. OF SORTS. WE’RE GROWING, WE’RE JUST NOT WE’RE GROWING, WE’RE JUST NOT GROWING AS FAST AS WE WERE. GROWING AS FAST AS WE WERE. THE BIG QUESTION AND IT WAS THE BIG QUESTION AND IT WAS REBORN IN 2008 IS HOW BAD DOES A REBORN IN 2008 IS HOW BAD DOES A RECESSION HAVE TO BE? RECESSION HAVE TO BE? IT CAN BE A LITTLE RECESSION. IT CAN BE A LITTLE RECESSION. THERE ARE THINGS THAT THAT SS TH THERE ARE THINGS THAT THAT SS TH THAT ARE NOT GOOD FOR ANYBODY IN THAT ARE NOT GOOD FOR ANYBODY IN A RECESSION, BUT WE CAN HAVE A A RECESSION, BUT WE CAN HAVE A SHALLOW ONE THAT’S NOT AS LONG SHALLOW ONE THAT’S NOT AS LONG AND DEEP. AND DEEP. THE DOW IS DOWN 3% TODAY. THE DOW IS DOWN 3% TODAY. THAT’S THE BIGGEST PERCENTAGE THAT’S THE BIGGEST PERCENTAGE LOSS OF THE YEAR. LOSS OF THE YEAR. IT ALL FEEDS ON ITSELF. IT ALL FEEDS ON ITSELF. IT’S PSYCHOLOGICAL. IT’S PSYCHOLOGICAL. IT’S NOT SCIENTIFIC. IT’S NOT SCIENTIFIC.>>I WANT TO TOUCH ON SOMETHING>>I WANT TO TOUCH ON SOMETHING THE PRESIDENT TWEETED TODAY. THE PRESIDENT TWEETED TODAY. HE CAME OUT AND BLAMED THE YIELD HE CAME OUT AND BLAMED THE YIELD CURVE ON THE FED. CURVE ON THE FED.>>YEAH.>>YEAH.>>WE KNOW THE PRESIDENT LOVES>>WE KNOW THE PRESIDENT LOVES TO BLAME THE FED FOR THINGS. TO BLAME THE FED FOR THINGS. ANY TRUTH TO THAT AT ALL? ANY TRUTH TO THAT AT ALL?>>NO.>>NO. NO. NO.>>ANY CONNECTION TO WHAT THE>>ANY CONNECTION TO WHAT THE FED’S BEEN DOING? FED’S BEEN DOING?>>NOT REALLY.>>NOT REALLY. THE PRESIDENT WHEN HE WASN’T THE PRESIDENT WHEN HE WASN’T PRESIDENT WANTED INTEREST RATES PRESIDENT WANTED INTEREST RATES TO BE HIGHER.LOWER. TO BE HIGHER.LOWER. HE BECOMES PRESIDENT. HE BECOMES PRESIDENT. I DID IT THE WRONG WAY AGAIN. I DID IT THE WRONG WAY AGAIN. HE WANTS THE RATES TO BE HIGHER. HE WANTS THE RATES TO BE HIGHER. HE GETS INTO OFFICE AND HE WANTS HE GETS INTO OFFICE AND HE WANTS THEM LOWER. THEM LOWER. ALL PRESIDENTS WANT RATES LOWER ALL PRESIDENTS WANT RATES LOWER ON HIS WATCH. ON HIS WATCH. HE REPLACES THE CHAIR JANET YELL HE REPLACES THE CHAIR JANET YELL YELLEN WITH HIS GUY POWELL. YELLEN WITH HIS GUY POWELL. AS YOU AND I DISCUSSED LAST AS YOU AND I DISCUSSED LAST TIME, INTEREST RATES ARE THE TIME, INTEREST RATES ARE THE FUEL IN THE TANK. FUEL IN THE TANK. IF YOU GET INTO A RECESSION, YOU IF YOU GET INTO A RECESSION, YOU WANT TO BE ABLE TO LOWER WANT TO BE ABLE TO LOWER INTEREST RATES TO STIMULATE THE INTEREST RATES TO STIMULATE THE ECONOMY. ECONOMY. IF YOU LOWER THE INTEREST RATES IF YOU LOWER THE INTEREST RATES BEFORE THE RECESSION AND YOU GET BEFORE THE RECESSION AND YOU GET INTO A RECESSION, YOU CAN GET INTO A RECESSION, YOU CAN GET STUCK IN THIS RECESSION FOR A STUCK IN THIS RECESSION FOR A VERY LONG TIME. VERY LONG TIME.>>I THINK ONE QUESTION PEOPLE>>I THINK ONE QUESTION PEOPLE MAY BE THINKING IS WHAT SHOULD I MAY BE THINKING IS WHAT SHOULD I DO? DO? WHAT IS THE SMARTEST WAY TO WHAT IS THE SMARTEST WAY TO HANDLE YOUR FINANCES AND HANDLE YOUR FINANCES AND YOURSELF IN THE NEXT SIX MONTHS? YOURSELF IN THE NEXT SIX MONTHS?>>I WANT TO REMIND PEOPLE THE>>I WANT TO REMIND PEOPLE THE THING THEY HAVE TO TAKE MOST THING THEY HAVE TO TAKE MOST SERIOUSLY IS THEIR INCOME. SERIOUSLY IS THEIR INCOME. THEIR JOB IS MORE IMPORTANT THAN THEIR JOB IS MORE IMPORTANT THAN THE STOCK MARKET. THE STOCK MARKET. BUT THE STOCK MARKET IS THEIR BUT THE STOCK MARKET IS THEIR SAVINGS. SAVINGS. IF YOU GET OUT OF THE MARKET AND IF YOU GET OUT OF THE MARKET AND YOU DON’T KNOW WHEN TO GET BACK YOU DON’T KNOW WHEN TO GET BACK IN, YOU CAN MISS THE FIVE BEST IN, YOU CAN MISS THE FIVE BEST DAYS FOR THE STOCK MARKET AND DAYS FOR THE STOCK MARKET AND ALL YOUR GAMES ARE GONE. ALL YOUR GAMES ARE GONE. IT’S NOT SOMETHING A LOT OF IT’S NOT SOMETHING A LOT OF PEOPLE DO. PEOPLE DO. YOU SHOULD GO IN AND MAKE SURE YOU SHOULD GO IN AND MAKE SURE THAT YOUR PORTFOLIO IS BALANCED THAT YOUR PORTFOLIO IS BALANCED ACCORDING TO YOUR RISK ACCORDING TO YOUR RISK TOLERANCE. TOLERANCE. TAKE THESE SURVEYS ALL OVER THE TAKE THESE SURVEYS ALL OVER THE WEB. WEB. TYPE IN RISK TOLERANCE. TYPE IN RISK TOLERANCE. THAT’S THE BEST THING YOU CAN DO THAT’S THE BEST THING YOU CAN DO FOR NOW. FOR NOW. IF THE SIGNALS CHANGE A LOT AND IF THE SIGNALS CHANGE A LOT AND WE LOOK LIKE WE’RE REALLY HEADED WE LOOK LIKE WE’RE REALLY HEADED FOR TERROR, I’LL COME AND TELL FOR TERROR, I’LL COME AND TELL YOU. YOU.>>THE ONE THING WE ALWAYS TELL>>THE ONE THING WE ALWAYS TELL PEOPLE IS JUST BREATHE, RIGHT? PEOPLE IS JUST BREATHE, RIGHT?>>YEAH.>>YEAH. PARTICULARLY IN BUSINESS TV THIS PARTICULARLY IN BUSINESS TV THIS IS WHAT WE DO. IS WHAT WE DO. WE TELL PEOPLE ABOUT ALL THESE WE TELL PEOPLE ABOUT ALL THESE LITTLE MOVES. LITTLE MOVES. I TREAT THIS INVERSION OF THE I TREAT THIS INVERSION OF THE YIELD CURVE LIKE A TORNADO YIELD CURVE LIKE A TORNADO WARNING. WARNING. IT DOESN’T SAY ONE’S COMING. IT DOESN’T SAY ONE’S COMING. IT SAYS THE PRECONDITIONS EXIST IT SAYS THE PRECONDITIONS EXIST FOR ONE, SO YOU SHOULD TAKE

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27 thoughts on “What Is An Inverted Yield Curve And How Does It Affect The Stock Market? | NBC News Now

  1. TLDW : i have no idea what im talking about, carry on, keep playing stock market based on your risk tolerance, good luck!

  2. I really think I'm going to vote Trump. I know he will totally tank the market…. Then I can come in and buy for cheap. Trump 2020

  3. A NBC NEWS SUBSCRIBER WHO IS ALSO A PERSON OF COLOR (POC) AND AN AOC SUPPORTER SHOT 6 POLICE OFFICERS IN PHILADELPHIA TODAY. FUNNY NBC NEWS ISN'T COVERING IT…………..

  4. And if the necessary precautions are not taken ?
    Can't count on Trump to do anything right when he has been doing everything wrong the last two years.
    Conservatives in Aust doing the same thing NOTHING and the are being warned by the reserve bank, who also warned if the trade war did not end soon a possible recession was on the cards .
    Hang on tight for the conservative clown car ride .

  5. Terrible, Terrible economy. Getting used to these 800 Point Drops, almost Every Day!! Is Nobody Even running the Economy?? It's an Absolute Bloodbath!

  6. So the time to buy is getting close at hand. Many people buying those 10 year bonds, so not surprised that the yield crashed down like a rock yesterday. We have at least a small interest rate cushion if something were to happen.

  7. Why is everyone in the comments blaming trump lol? Recessions happen on a cycle, Hillary could be our president and this would still be happening (most likely faster)

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