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S&P 500   4,026.12
DOW   34,347.03
QQQ   286.92
Considerations When Rolling Over a 401(k) into a Roth IRA
See how to make money instead of spending it on Black Friday with this offer (Ad)
Sober or bright? Europe faces holidays during energy crunch
Biden eases Venezuela sanctions as opposition talks resume
See how to make money instead of spending it on Black Friday with this offer (Ad)
Whole Foods decision to pull lobster divides enviros, pols
Airbnb has a plan to fix cleaning fees
See how to make money instead of spending it on Black Friday with this offer (Ad)
Saudi viewers angry over apparent ban on World Cup streaming
Cuba's informal market finds new space on growing internet
S&P 500   4,026.12
DOW   34,347.03
QQQ   286.92
Considerations When Rolling Over a 401(k) into a Roth IRA
See how to make money instead of spending it on Black Friday with this offer (Ad)
Sober or bright? Europe faces holidays during energy crunch
Biden eases Venezuela sanctions as opposition talks resume
See how to make money instead of spending it on Black Friday with this offer (Ad)
Whole Foods decision to pull lobster divides enviros, pols
Airbnb has a plan to fix cleaning fees
See how to make money instead of spending it on Black Friday with this offer (Ad)
Saudi viewers angry over apparent ban on World Cup streaming
Cuba's informal market finds new space on growing internet
S&P 500   4,026.12
DOW   34,347.03
QQQ   286.92
Considerations When Rolling Over a 401(k) into a Roth IRA
See how to make money instead of spending it on Black Friday with this offer (Ad)
Sober or bright? Europe faces holidays during energy crunch
Biden eases Venezuela sanctions as opposition talks resume
See how to make money instead of spending it on Black Friday with this offer (Ad)
Whole Foods decision to pull lobster divides enviros, pols
Airbnb has a plan to fix cleaning fees
See how to make money instead of spending it on Black Friday with this offer (Ad)
Saudi viewers angry over apparent ban on World Cup streaming
Cuba's informal market finds new space on growing internet
S&P 500   4,026.12
DOW   34,347.03
QQQ   286.92
Considerations When Rolling Over a 401(k) into a Roth IRA
See how to make money instead of spending it on Black Friday with this offer (Ad)
Sober or bright? Europe faces holidays during energy crunch
Biden eases Venezuela sanctions as opposition talks resume
See how to make money instead of spending it on Black Friday with this offer (Ad)
Whole Foods decision to pull lobster divides enviros, pols
Airbnb has a plan to fix cleaning fees
See how to make money instead of spending it on Black Friday with this offer (Ad)
Saudi viewers angry over apparent ban on World Cup streaming
Cuba's informal market finds new space on growing internet

What Does an Inverted Yield Curve Mean For You?

What Does an Inverted Yield Curve Mean For You?You’ve heard the term inverted yield curve (IYC) mentioned on many occasions in the media, even on the evening news. It has a negative stigma attached to it, but like many people, you may not know what it actually means or how it can affect you. A yield curve is created on a graph by plotting government treasuries by maturity on the X-axis and yield on the Y-axis. For example, from left to right you could plot a 3-month treasury, to a 1-year treasury, 2-year treasury, then 5-year treasury, 10-year treasury, and so forth on the X-axis in order of shortest to longest term. The long end of the yield curve starts with the 10-year treasuries. The yield is labelled on the Y-axis from zero and to highest bottom to top. As you plot the yield and maturity for each treasury, the plots should incrementally rise higher with the longer maturity dates. Shorter maturities typically have lower yields, and they rise as the maturities get longer. Connecting the plots generates the visual yield curve. The yield curve helps investors visualize and measure the risk and potential rewards of investing in treasuries.

Positive Yield Curves

The yield curve is used as a reference used by investors when comparing fixed income instruments beyond treasuries including government, corporate, and municipal bonds and CDs. Yield curves have three shapes, positive upward sloping, flat, and negative inverted sloping. A positive yield curve is upward sloping as shorter maturities have lower yields than longer maturities. This is because risk grows with longer time periods and therefore the reward should be proportionate. It is the most common and expected yield curve during time of economic growth. This can eventually lead to inflation causing higher interest rates.


Inverted Yield Curves

Inverted yield curves have falling negative slopes as short term maturities have higher yields than longer maturities. They occur when investors expect an economic slowdown as risk is greater in the short-term than in the long term. As investors seek safety in long term bonds, yields rise for shorter maturities. As investors move out of short-term bonds and into long-term bonds, yields invert. Flat yield curves are the mid-stage or transition stage when yield curves reverse from positive to negative and vice versa. Flattening yield curves happen as long term rates drop as short term rates rise on inversions, which is the early signal of an inversion.

Impact of Inverted Yield Curves

Inverted yield curves are like the Mothman sightings which are usually seen as a warning signal of impending economic slowdown possibly leading to a recession. This was the case during the 2007 real estate bubble and financial meltdown as the yield curve inverted in 2006 ahead of the recession. The last give recessions show that an inverted yield curve signals a recession six to 36 months after inversion. The yield curve briefly inverted in 2019, but the pandemic quickly steepened following the pandemic. Overall, the inverted yield curve has resulted in signaling the last five recessions in 62 years from six months to three years out. Critics argue that coincidence and not correlation with the inevitability of economies going through periods expansion followed by recessions.

Distortion of the Yield Curve

The 2008 financial crisis spawned the era of quantitative easing in which the Federal Reserve “prints money” by buying long-term U.S. treasuries to stimulate growth (and the stock market). By doing so, it causes yields to fall on the longer duration maturities thereby inverting the yield curve in the process. Or if the Fed is selling long term treasuries why buying short term treasuries to flatten and steepen the yield curve. Critics point out this distortion caused by the intervention by the Fed makes the inverted yield curve a less reliable recession indicator.

How Does it Affect You?

Banks use the yield curve tempered with credit risk to determine what rates they will charge you on loans. This will affect your credit card, car loan, and mortgage payments. Since yield curves precede recessions and bear markets usually occur in recessions, a yield curve inversion can set off market sell-offs as investors take a risk off stance and move into the safety of long-term treasuries. Many argue this to be self-fulfilling rather than correlated. However, the yield curve continues to deepen in 2022 as the Fed maintains a hawkish stance with its interest rate hikes

7 Small-Cap Stocks That Could Rocket Higher in 2023

Small-cap stocks are a class of equities that can significantly impact a growth portfolio. There are a couple of reasons for this.

First, in bull markets, small-cap stocks tend to outperform the broader market because investors have a larger appetite for risk. Second, small-cap stocks are historically an indicator of investor sentiment turning from bearish to bullish (and vice versa). This rewards investors who stay invested in these stocks.

Of course, that risk works both ways. In a market correction and/or bear market, small-cap stocks can drop significantly more than mid- or large-cap stocks. That's the challenge for investors, but one that can be managed when you look for small-cap stocks that are leaning into market trends.

That's the focus of this special presentation. It focuses on seven small-cap stocks well-positioned for market trends likely to stick around through 2023.

View the Stocks Here .

Jea Yu

About Jea Yu

Contributing Author: Trading Strategies

With over 20 years of active participation and analysis of the US equities, options and futures markets, Mr. Yu brings fresh insights into the workings of the financial markets. He has published four books by esteemed publishers McGraw-Hill, John Wiley & Sons, Marketplace Books and Bloomberg Press. His brainchild, the Underground Trader, was voted Forbes Best of the Web for four consecutive years under the active trader category. He has been a featured speaker all over the country at various expos and seminars who enjoys a standing-room-only reception in the largest convention halls from New York to Las Vegas. He has been quoted and featured in USA Today, Wall Street Journal, Traders Magazine and the Financial Times and various trade publications like Stocks & Commodities, Active Trader and Online Investor. Mr. Yu has a B.A. in Liberal Arts and minor in Business Administration from the University of Maryland.
Contact Jea Yu via email at JeaYu21@gmail.com.