Why Investors Are Obsessed With the Inverted Yield Curve

Amid a shaky marketplace, investors are eyeing the yield curve for signs of economic stability. History shows that when the yield curve inverts, a recession may soon follow. Photo Composite: Stephanie Swart for The Wall Street Journal.
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[@Mckennie61751]

Given the re-inverting yield curve and increased market volatility, I'm reevaluating my portfolios, and the outlook is concerning. How should I reallocate funds within my $1M portfolio to navigate the potential economic downturn?

[@WestonScally7614]

The inversion implies anticipated lower future growth, potentially resulting in decreased lending and invest-ment. Hence, finding the appropriate asset allocation and collaborating with an advis0r experienced in bear markets is imperative.

[@louis71350]

Accurate asset allocation is crucial, and some individuals use hedging strategies or allocate part of their portfolio to defensive assets for market downturns. Expert guidance is vital for achieving this. This approach has helped me stay financially secure for over five years, yielding nearly $1 million in returns on investments.

[@SageMadsen]

I’ve been down a ton, I’m only holding on so I can recoup, I really need help, who is this investment-adviser that guides you

[@Mckennie61751]

Thank you for the lead. I searched her up, and I have sent her an email. I hope she gets back to me soon.

[@ivermektin6874]

0TDE options on the SP500

[@Raymondjohn2]

Understanding personal finances and investing will most likely lead to greater financial independence. By being knowledgeable about money and investing, individuals can make informed decisions about how to save, spend, and invest their money. A trader made over $350k in this recession influenced market

[@Oly_laura]

Stocks are pretty unstable at the moment, but if you do the right math, you should be just fine. Bloomberg and other finance media have been recording cases of folks gaining over 250k just in a matter of weeks/couple months, so I think there are alot of wealth transfer in this downtime if you know where to look.

[@martingiavarini]

There are actually a lot of ways to make high yields in a crisis, but such trades are best done under the supervision of Financial advisor.

[@lipglosskitten2610]

The best course of action if you lack market knowledge is to ask a consultant or investing coach for guidance or assistance. Speaking with a consultant helped me stay afloat in the market and grow my portfolio to about 65% since January, even though I know it sounds obvious or generic. I believe that is the most effective way to enter the business at the moment.

[@Oly_laura]

@@lipglosskitten2610 Impressive can you share more info?

[@lipglosskitten2610]

@@Oly_laura My advisor is ‘’Christine Jane Mclean’’ she’s highly qualified and experienced in the financial market. She has extensive knowledge of portfolio diversity and is considered an expert in the field. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market

[@SolomFoz]

We need these educational clips very veey badly. Thank you.

[@kozmosnotgay]

I. Fawzy yes.... veey veey badly

[@shebanadam7569]

absolutely mate

[@pranjalvw2193]

Way more informative than my 3 Days Derivatives and Macroeconomics Class

[@arunavasarkar3600]

bengali? nice

[@LuxusHauserGroup]

This is why real estate portfolio yields are more attractive for investors and a better hedge against inflation.

[@reighn401]

Hehe 😻🐧😿

[@MegaPitbull1999]

then you are probably dumb

[@ukrd94]

Agreed! I am here because those overly priced 300$books dont explain anything. Mine has repetivitve chapters that mention things but don't explain them

[@tonicruger]

I find myself at a crossroads, uncertain whether to liquidate my $150,000 stock portfolio. I'm seeking advice on the best strategy to capitalize on this current market.

[@kurttSchuster]

Well the bigger the risk, the bigger the reward and such impeccable decisions are better guided by professionals

[@eastwood224]

Yes true, I have been in touch with a financial advisor. With an initial starting reserve of $80k, my advisor chooses the entry and exit commands for my portfolio, which has grown to approximately $550k.

[@tonicruger]

Pls who is this coach that guides you? I’m in dire need of one

[@eastwood224]

My consultant is Nicole Desiree Simon She has since provide entry and exit points on the securities I focus on. You can look her up online if you care for supervision.

[@tonicruger]

I Found her online page by searching her full name, I wrote her an email and scheduled a call, hopefully she responds soon. Thanks

[@itstanzy]

This is the best and simplest explanation of yield curve.. Kudos #WSJ

[@hunantrain]

THIS used to be one of my most watched YT Fin channels... sadly, it's been a while since i visited it has been a very rough year... i am experiencing one of the toughest phases of my life... Lost a fortune lnvesting in emerging companies. Hopeful, for a turnaround.

[@michealweebles6258]

It's the market if you don't leave during the bear, you will be fine. You should have opted for a suitable Ai platform or traded with Gary Joe Wilde, or any other regulated advisor. As a beginner investor myself, I have made over 45K profit in a few months of coping Gary's investing positions.

[@bertjames436]

Hi Mike. Any ideas how to reach Gary Joe Wilde? I love the testimonies I have seen about him he seems not to own a video channel here.

[@michealweebles6258]

@ bertjames, run a quick web search about him he's sec regulated they aren't permitted to own or operate investing video channel.

[@kentucky4494]

Investing so much in emerging companies is a ridiculously bad strategy you need to balance your portfolio against risk. Investing must be like the healthy food pyramid. BTW, I commend Gary's trading pattern too. Different perspective, different technique

[@MIchaelGuzman737]

To be honest, I'm not sure investing is a wise decision right now. Notice how often things fail. As I still have some time before retirement, I'm looking for a good investment strategy for my money, even though I've read books and articles by well-known investors, past and present. In order to generate passive income, I want to start building a solid and reliable portfolio.

[@sommersalt88]

I agree with you. The market will always recover. The goal is to find quality stocks with long-term potential. This is difficult for the average person as they have to follow a lot of industry news, do technical and fundamental analysis, etc. It's easier to invest through an advisor who knows how things work and get high returns. Market time is better than market timing. Currently have a $686,000 portfolio that follows these principles.

[@MatthewVinson]

Can you recommend who your advisor is? I've thought about making the switch as it seems like the most sensible solution out there. I've heard of investors raising hundreds of thousands of dollars despite the downturn.

[@sommersalt88]

I work with "Jill Marie Carroll". If you wish, you can look her up yourself.

[@MatthewVinson]

Thank you. I just checked her out. She seems really proficient. I'll follow up with an email. Thanks for the lead.

[@jaygupta2875]

Whether to invest doesn't depend on the direction of the markets: there are strategies for rising markets, falling markets and flat markets. If you can raise capital to invest, the direction of the markets determines HOW to invest, not whether to invest.

[@boricuaboy4e]

Am I the only person wondering why he is pronouncing borrowing are burrowing? 🤣😂

[@petemiller2598]

He must be Canadian.

[@Wafflelover344]

No you're not was just about to post actually

[@Youbeentagged]

It is more buorowing than burrowing

[@deeremeyer1749]

@Donald Kasper A "southerner" from southern Manitoba maybe.

[@TheAlexwilhelm]

borrowing not boour-ho-ing

[@surfsessions100]

Here here!

[@surfsessions100]

Boooering

[@benjaminbode]

bouroughiine

[@dwpetrak]

For real! I have never hear of bore-o-ing

[@maverik15j]

I knew this was going to be the first comment. Thx KZbin.

[@Natalieneptune469]

would recession hurt? I looked at 50 relevant stocks over 2020 and 2008 recession, across the board they all dropped 50-90%. I have deployed 1/4 of my bankroll at -25%. I am slowing buying at -the 40% threshold. Good ships bad ships all go down in low tide. I have ordered to buy at -60%, -70%, -80% and beyond. At the end of the day my average buy in will probably be -50% to -60%. That will turn a 3 bagger to 6x. I will likely start unloading after 2x (4x for me)

[@PhilipMurray251]

That proves Rick’s hypothesis that nobody can catch the bottom and the top precisely. Winning is secondary for me. Calculating a positive expected value, the Certainty Equivalence and avoiding chance of ruin are more important.

[@marianparker7502]

@@PhilipMurray251 The lower the market goes, the cheaper everything becomes. You just don't realize it until after the market inevitably recovers.

[@Natalieneptune469]

@@marianparker7502 I’m Using this period to accumulate more assets, whatever my hands can get on.

[@Robertgriffinne]

@@marianparker7502

[@marianparker7502]

@@Robertgriffinne This is truly encouraging... How can i reach this FA?

[@samuelpezzetta7084]

Very informative and straightforward. Thank you!

[@joellim7010]

This is by far the best explanation for yield curve that I have seen KZbin. Awesome Job!

[@workwithnature]

Today already the 3 month and ten year have a strong inversion. The 30 year is barely holding.

[@Stinger913]

Is 10 year considered short or long term bonds?

[@tonynaq7498]

@@Stinger913 long term

[@hemantsarthak]

finnally some useful content from WSJ ... srsly guys thank the guy who was the key factor for this video and promote him

[@nekonari22]

This is very helpful. Every time I hear yield curve on NPR’s Indicator podcast, I’ve been scratching my head. This explains those words perfectly. Thanks!

[@gewtz]

in 4 minutes i learned what took me 2 weeks of class. Its so sad how things are explained so terribly in university...

[@jutikant]

Thank you for this knowledge vdo. This is much easier to understand than what my finance teacher taught in class.

[@casperhxr6018]

Hands down the best Yield Curve explanation ever!

[@omuribep]

Excellent and really well explained ! Thanks.

[@yakkyuu12]

Just a NOTE to the Wall Street Journal and producers of ALL their FANTASTIC VIDEOS, I will speak out for the many who I don't KNOW , ALL who come here to LEARN AND EVEN QUESTION what you produce!! THANK YOU -- SO MUCH! The education, SPEED of comprehending and CLARITY is FANTASTIC. Your ability to produce this with clarity and to the point, I PROMISE has a LASTING EFFECT! I HOPE just this small gesture of gratitude will help you KNOW the LASTING, in depth knowledge that WILL help so MUCH to the MULTITUDES --- what you do MATTERS, what you RESPONSIBLY, professionally create is important!! It goes along the OLD ADAGE of REAL professional journalism( that there is SO LITTLE of on the internet!!) "We will ONLY print journalism that is FIT to print" I thank you for holding yourself to a STANDARD that is GONE. You are ONE of the FEW sites that is TRUSTWORTHY and WORTHY of our recommending to others, because of the TRUTH and QUALITY of your production and reporting!!!

[@durgeshkinnerkar2826]

Please post More of these basic educational clips on economy and stock market......great job

[@Anurag-st7wl]

Bful animations. This is the kind of tech integration we need in our education systems

[@tinnguyen2219]

Thank you so much for sharing this useful data ! Greatly appreciated.

[@davideg5947]

Everyone should learn this. You would be able to see if your financial advisor is looking for your best interest or has no clue with you hard earned money!!!

[@jamesclarity1077]

Here on Aug 14 2019

[@sparktheblunt1144]

From the dead huh

[@PepsiMan42069]

SparkTheBlunt *WARNING: GROUP MASTURBATION BEGINS IN 10 (TEN) MINUTES*

[@HaruSakamoto]

Next one will be at least 10x worse than 2008

[@sparktheblunt1144]

Lewis hughes tf u talkn bout

[@PepsiMan42069]

SparkTheBlunt surreal joke

[@Justice4x]

This is pretty informative, learned a lot from this than school

[@brandonspiegel2293]

I greatly appreciate the knowledge!!!!

[@seunwilliams4516]

Best explanation on this topic

[@scottk7515]

This video is by far the most lucid, well-prepared exposition on yield curves I've seen. Well done, WSJ and thank you.

[@mindsinmotion2825]

This Explaination of what an #invertedyieldcurve is makes the most sense

[@SportsIncorporated]

If the Fed's holding half the long term Treasury bonds. Do you get a true yield curve?

[@AdlinLing]

The Federal Reserve is neither federal nor has any reserves.

[@goldrushpro]

It's a private counterfeiting operation that is protected by the violent force mechanism of the "corporation of the united states".

[@reillydougherty2166]

@Teringventje the USA doesn't print its own money, the fed reserve does and then we are taxed interest on our own money, every time they print a dollar it becomes weaker and more interest to be paid on it therefore we will always be in debt because the fed is constantly printing money charging us.

[@reillydougherty2166]

Teringventje it’s cool you don’t understand how it works and that’s fine

[@reillydougherty2166]

Teringventje i already did in simple terms, you can read about the rest

[@davidbogaert4611]

G. Edward Griffin- The creature from Jekyll island. If you are really interested in the creation of the Federal Reserve

[@NikolaStamenkovic6]

Wow, straightforward. Good job. Usually wsj hide or misses something but this was nice

[@nihaal4783]

Hello, thanks for explaining. Can someone clarify how investors would anticipate a recession when it is themselves who affect the left side of the yield curve by choosing to/ not to invest in long dated bonds? If they are influencing one part of the curve, don't they basically control the narrative of the economy going into recession/ growing?

[@michaelhale7802]

Investors aren't a collective - they're individuals (people, businesses, etc.). They make individual predictions based on what they believe is happening in the market. So in a sense, yes they control the narrative, in the same sense that (for example) customers control Walmart's profits. But they have no real leverage as individuals. Additionally, investors react to news. If there's all this buzz going on about a recession coming, and there's good reason to believe so - obviously a large amount of investors are going to start liquidating their equity in companies so they don't incur large losses. No one likes to see their money vanish into thin air.

[@misterwonderful8628]

The government needs to control the markets and the economy...they will sometimes suck money out of the market in various ways. This is also accomplished to drive possible antagonists to a better and more stable country market away and find best support at better bid for larger and more involved benefactors and producers in the same economy as an incentive to continue doing such. True captains of industry are the government.

[@Dear_Mr._Isaiah_Deringer]

Well there is of course also the supply amount of Bonds, because that is quint essential how government debt is made. Rising Budget deficit means more Bonds are being issued to stuff that Budget gap and vice versa. How the government chooses to issue those Bonds (2y, 5y &10y) is up to the treasury.

[@mauriciogonzalez6302]

The very definition of a recession is identified when you have two consecutive periods where gdp falls. So you can’t call anything a “recession” unless it’s already happened.

[@iali00]

Great point. The fed could also just cut rates to prevent the inversion. Seems pretty simple to me.

[@wakeupnyc718]

Basically , a fear and greed kinda thing. Great video , made me understand the inverted yield curve way better than the mainstream media.

[@21blue64]

This is mainstream media It's the Wall Street Journal

[@mustbeaweful2504]

I appreciate how this video was constructed for those who haven't a clue (such as myself).

[@ryanemeziane7417]

Very nice and clear explanation! Thank you!

[@JXAR]

Thanks!

[@julianmora5469]

Thanks! Nice video

[@yaoguoli3955]

Well explained, thanks.

[@nater88dawg]

Incredibly helpful!

[@John-yg2rt]

If you have access to a Bloomberg Terminal through your work or university there is a great in-depth explanation of yield curves in the fixed incomes segment of the Bloomberg Market Concepts tutorial

[@Stinger913]

Actually?

[@anshulsharma9424]

Very informative 👍

[@404baron]

the price of a bond goes up or down in response to the yield curve not the opposite as you mentioned @wall street journal ! we calculate the price of a bond from the the rate demanded by investors ; for example : if a bond is yielding at 6 % and investors are demanding 7% that will cause the price of the bond to sink to compensate the 1 % difference.

[@mohdzaki7699]

Thank you WSJ

[@shebanadam7569]

thanks, I quite understand it now.

[@akshaykothari93]

Brilliant Explanation.

[@tomlindsay7861]

Great explanation. Thank you

[@yosmuc]

Very clear! Thank you 🙏

[@CommandoMaster]

Short term savings interest rates are higher than long term interest rates in banks. That's inverted. Good to know.

[@tomliuyt]

I am impressed with how well it's animated

[@ericholder6923]

Awesome presentation

[@spaceoddity2485]

Very good video. Except I do not know why they are already showing a bar for a recession at the present time. On their 1975 to present yield curve chart.

[@user-ez2qd9yb7m]

Watching this now in March 2022, you were right Fed raised the rates and we are observing an inverted yield curve now. Brace for impact 😂 Thank you for explanation!

[@Diatom1k]

Amazing to watch from 2022

[@simonaubrycpge6032]

Excellent video thx.

[@DougOfTheAntarctic]

Good beginner's guide to the yield curve. But I don't go to WSJ for videos pitched so low.

[@sfm8099]

Actually longer the duration of the loan lesser will be the interest rates then why the interest rates for 10 year bonds are higher than bonds having lesser duration than it.

[@minjung5102]

Great video!!

[@superdivinus987]

So, if left side is high, you get good interests, if right side is high, you should invest in markets and stocks

[@meghanparry6270]

August 2019 there was yield curve inversion.

[@dragonhold4]

'Treating the symptom, not the cause.'

[@DePalma.]

Great vid...loved the “boooooorowing” Canadian accent lol

[@GauravGupta-gd9wv]

Very nice and brief explanation

[@samheavenn]

I need a Subtitle, please 🙏🙏🙏

[@justacitizen111]

What this 4 minute video covered, takes Econ and Finance professors in universities a month to cover and even then they wouldn’t still do as good of a job explaining. Thanks WSJ!

[@ErikPT]

What professor did you have? My professor answered all my burning questions even if he was a commercial trader in commodities futures.

[@ytoh6408]

can anyone share a link to a daily chart of the yield curve? I tried searching online but did not find anything similar to the one shown in the video.

[@mistersig]

burrowing or borrowing?

[@Rubens_991]

Wow, great and simple explanation. People always forget demand also play a role in the yield curve, not only monetary policy

[@mirceastaicu4131]

I wouldn't call the amount of money an investor earns annually the bond's yield.The amount of money an investor earns annually is called, if I'm not mistaken, the annual coupon payment The Federal Reserve System raises the short term bond yields by purchasing short term bonds through open market operations. Reducing the supply of short term bonds increases their yields because the yield is a result of a bond's market value and its coupon annual payment

[@JohnnyRedmond]

Great info.

[@MyName-ui5xu]

Bond. Repayment through interest which called as Yield. Shortage Yield - limit inflation - let more people borrow Unemployment rate Price drop : Yield rise

[@Olav3D]

Will be interesting to see the response to the next recession when the interest rates are already way too low.

[@bishboshs]

More QE and possibly fiscal stimulus I would imagine.

[@Galbat0]

Somebody help! How to make videos like this? This is so beautiful. Is there any tutorial channels? Please recommend me

[@Try_ingle]

Do an update for 2022

[@mohitkumarkhatri8511]

Do video on tactics of economists doing frauds or saving there company 4m bankruptcy..

[@begley09]

And now it inverted, what’s your take?

[@jeremiahlim2925]

Haven't you seen?? Australia stock index futures, it is forming a head @6300 and shoulder @6030 and it is breaking for big fall and heading towards 4600.

[@thestockmarketchannel8086]

WSJ, are you going to make an updated video on the yield curve since it's now inverted here in the US?

[@davisoaresalves5179]

Very good video.

[@PeterSeverinRasmussen]

How does the yield curve from the rest of the video relate to the time series "yield curve" at 3:42?

[@PeterSeverinRasmussen]

Ah, perhaps I can answer myself. The legend says "10-year minus 2-year yield". So perhaps each time step is a snapshot of the right side of a yield curve minus the left side.

[@bulgariancollector5944]

Curved Invert Yield

[@asheshshrestha]

more videos like this!

[@nocthepanafricanistcapital5467]

Excellent

[@NoName-zb1gm]

This is why the Fed needs to keep raising interest rates. I don't know why the "paused". Are they going slow so the economy doesn't crash before the 2024 election? Interest rates probably need to be close to 10% especially with all the government spending.

[@george6977]

👍Clear explanation. CNBCs just confused things with a traffic analogy.

[@flossenking]

Interessant

[@Samklemens]

Yeah but what about when the fed starts cutting short term rates like they are now. Isn't it possible the short term rate falls just as quickly as the long term rate? Do you ever see protracted, flat yield curves? Or is the buying pressure so great for long term bonds that it doesn't matter what the fed does with the short term rates, the long term rates fall enough to make the curve invert?

[@russelljabara777]

I think it maybe time to update.

[@chung2055]

Why would you invest in 10 year bonds, when interest rates are going up?

[@AdamSmith-gs2dv]

The two/three and two/five inverted. The most important one the two/ten has not inverted yet

[@VinceroAlpha]

So then what happens when the Fed keeps rate on hold, but more long term bonds?

[@lakshaysinghal6167]

I just want to say, Thanks

[@misterwonderful8628]

An obsessed investor is one who likely is informed...and being so informed and knowing that many of these market numbers are manipulated or malarchy...I feel it is highly unlikely that anyone is obsessed with inverted yield curve data...unless they are newly obsessed with the markets. So.....what are we selling?

[@JD-so1zv]

Well well well, funny enough now there’s videos on ohhh the yellows curve is crazy inverted but this time it’s a false signal….. I think I’m gonna go ahead and YOLO this one and withdraw my retirement accounts Michels burry made a 1.2B bet on the markets going down and that made me look I to the yield curve which is wildly inverted way more than all the ones mentioned in this video

[@celica96]

So when the economy is healthy, investors don't want to lend the government money on the long term and they're more interested in stocks. This lowers the demand for bonds, and in order for the government to make its bonds more desirable it raises the interest rate so people would buy them. Did I get that right?

[@John-yg2rt]

Bonds are considered debt and therefore are obligations, equities (stocks) are not. Because higher risk = higher potential for large return OR large loss, stocks by nature have much more volatility. When the stock market is doing well, companies are doing well, so investing in stocks can get an investor much higher returns. So its not that people don't want to lend to the government when the market is booming, its just that they can earn a lot more in other investments. The Fed primarily changes the "Fed Rate" (the 3month US government bond rate) to control inflation, which is actually good to a certain extent. When inflation gets close to 0 its a sign of a slowing economy, the Fed usually tries to keep inflation around 2% annually

[@smugshrug]

If only we knew what was coming a year after this video was made.

[@dimadiall]

Best explanation on this subject I saw thus far

[@kunalduran8049]

Which software is used to make these kind of videos?