Don’t Ignore What the Yield Curve is Telling Investors

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Boaters often take the warning blow of a foghorn for granted and disregard it. But all skippers pay attention when they hear the scraping of their hull against a reef.

The yield curve is a financial foghorn. It is bellowing that something is drastically wrong. As evidenced by earnings growth estimates for 2023, financial skippers are going about their business as if no reef lurks ahead and a recession is unlikely.

Yield curve foghorns are often unheeded by investors as they tend to blow well before danger is apparent, leaving many unprepared when problems arise.

The 10-year/3-month UST yield curve is at its most negative level since 1982, as I share below.

The blast of the financial foghorn is deafening, but the financial waters and economic environment appear relatively calm.