- Since bonds are loans to borrowers, a bond’s interest rate is tied to the prevailing rate environment at the time of issuance.
- Historically speaking, from the time yield curves begin to invert, the span to the next recession runs roughly 9-months. However, note that yield curves are currently declining, suggesting economic growth will weaken.
- The risk of a market correction rises further when the Fed is tapering its balance sheet and increasing the overnight lending rate.
- The Fed should use the $120 billion in monthly QE to hike rates and prepare for the next recession. But, instead, they continue to kick the “policy can” further down the road.
For further details see:
When Is The Next Bear Market? 3 Things Will Tell You