US yield curve has been a mostly reliable tool for predicting a recession
In this tweet, Hedgeye Risk Management CEO Keith McCullough mocked crypto investors and tech stocks bulls for disregarding the impact of the yield curve.
"I'm old enough to remember the last few times crypto and QQQ bulls thought the Yield Curve wasn't a thing... New YTD lows this morning," heThe financial analyst has noted that the yield curve has just hit new year-to-date lows, implying that this could signal more trouble ahead for markets as recession worries continue to persist.
For instance, if central banks keep interest rates artificially low or high using monetary policy actions, they can distort the shape of the curve regardless of whether there are actual signs of economic distress or expansion in sight. Similarly, other factors such as inflation and changes in investor sentiment can play a role in bending the shape of the yield curve, rendering it less reliable for predicting recessions.
What's more, not all inversions send equal signals; some might be fleeting, while others could portend extended downturns. Therefore, it is important to pay attention not only to absolute levels but also to changes in short-term versus long-term interests over time if we want to get closer to understanding what is ahead with any degree of accuracy.
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