The US Yield Curve Inverted. When Will the Next Recession and Large Stock Market Fall Come?

Dear Reader,


The US Treasury yield curve inverted, that is the yield on 3 month bills become larger than the yield on 10 year Treasury notes.

Many economists and financial market participants consider the US treasury yield curve inversion as a harbinger of an upcoming recession. The problem is that the yield curve inversion is an accurate indicator, but its timing is not so great. In the past US yield curve recession has predicted correctly that there has been a recession 6 months ago or a recession will come in the next 2 years.

So when will the next recession and large stock market fall come? I stick with my prognosis that the US and global economy will lapse into a recession and a stock bear market, a fall of more than 20% for the major stock market indices, will come in 2021.

Why? First, because Donald Trump, The President of the United States  and his administration will make every effort to support the economy until the US Presidential elections in 2020. Once the Donald Trump Administration is reelected the stimuli for the US and as proximity the global economy will be tapered.

Second, historically we have had a recession after 5-7 years. The recovery that started in 2009 is one of the longest on record, so it is time we had an economic downturn. The credit expansion has gathered speed and soon fear will overcome greed.

Third, China's economic growth which has largely supported the global economy is about to fall below 6% which could cause social unrest and China could lapse into a severe recession, which will drag down with it Asia and the world's economy into a recession. Combined, US and China are responsible for circa 40% of world's GDP or global economic output produced every year.

What about stocks? The coming recession will be mild and prolonged, just like the recovery. So the cumulative loss of global GDP could well turn out to be larger than the Great Recession in 2008-2009. Stocks will fall into a prolonged bear market or the main stock indices will lose 20% or more of their value. How to navigate the coming stock market fall? By actively trading defensive, high devidiend stocks like healthcare, consumer staples, partly real estate. I also expect during the coming economic downturn large and midsized global emerging countries and their stock markets like India, Russia, Brazil, Indonesia, Mexico and Turkey to outperform their major developed Western peers and China.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed in the blogpost and posts on social networks(Twitter, LinkedIn etc.) are the author's and they in no way express the opinion or official position of the company where I am working currently!

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities,currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Kind regards,

Petar Posledovich