A historically popular indicator of future trends is the relationship between the 2-year and 10-year US Treasury rates.
In a strong and growing economy, the 10-year rate would be higher than the 2-year rate. This is because looking further into the future, we would expect the economy to be stronger and better than it is today. In theory, if we only look two years into the future, there would be less growth in the economy than we would expect over 10 years, simply because there is less time.
When the 2-year and 10-year rates invert, that means the long-term outlook is weak. In fact, the inversion is often used to signal a recession lies about 8-12 months into the future.
That said, the chart above shows that the time in between the inversion and the Bull Market Peak can offer significant returns.
The 2-year and 10-year rates inverted briefly on 4/1/2022, and again on 7/6/2022, this time remaining inverted through present.
It is likely that we have already seen the Bull Market Peak on this one. My prediction is that the markets will continue to see volatility and have some pain to go through until the market and economy are back on track creating new highs!
Here at The Wealth Strategies Group, we remain focused and ready to take action as necessary.
I am interested in your thoughts, comments, and questions!
Brittany N. Jarocki, CFP®
CERTIFIED FINANCIAL PLANNER™ Professional
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. Investing involves risk. Loss, including loss of principal, may occur. No strategy assures success or protects against loss. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.