Yesterday we got the first US yield curve (3 and 5 year) inversion since 2007. Usually a recession follows within two years but I don’t want to scare you with that. Firstly, it doesn’t have to happen immediately and secondly, if you read any of my posts lately you know that getting defensive is not something we should fight against and in that case you’re well prepared for a case of a downturn.
The point of this post is to point out that we could see a flight to safety, that is into treasury bonds. A lot of people are expecting inflation and interest rates to rise over time, meaning bond prices to fall, including me (see Bond breakdown?). But it looks too many got ahead of themselves so it would be irresponsible to ignore the intermediate term risks in the market. Let me present what I think could happen.Read More