The markets kicked off the trading week with the spread between the 3-month and 10-yr Treasury yields inverted for the second trading day in a row, leaving some investors worried about the possibility of a slowdown ahead.
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But some market strategists say a yield curve inversion may be a signal to buy.
“You will end up seeing the S&P 500 peak about 18 months after the yield curve inverts, so this is actually a signal to buy in the equity markets right now,” CFRA investment strategist Lindsey Bell told FOX Business’ Connell McShane on Monday.
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Bell added that while banks may stop loaning when the yield curve inverts, the overall process takes time and doesn’t lead to a recession in the short term.
Raymond James chief economist Scott Brown said he sees a 30 percent chance of a recession in the next 12 months based on how flat the yield curve is sitting at time of publication.
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“The yield curve has been probably the single best economic indicator of recession that we have had over the years,” he said on “Cavuto: Coast-to-Coast.”
Brown also added it is typically a year between the time the yield curve inverts and when the economy formally enters a recession.
“The odds don’t favor a recession here, but the odds certainly have increased.”
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Former Federal Reserve Chair Janet Yellen told an audience in Hong Kong Monday that she believes the yield curve may signal a need for the Fed to cut interest rates rather than an indicator of a looming recession. Chicago Federal Reserve Bank President Charles Evans also commented that the U.S. economy is showing signs of slowing, but there is no reason to worry about a potential recession.
The 3-month and the 10-year treasury yields inverted for the first time since mid-2007 on Friday.
