A yield curve inversion occurs when short-term interest rates exceed long-term rates, suggesting investors expect an economic slowdown. Such inversions have preceded recessions, making them a closely watched economic indicator.
The U.S. Treasury yield curve is normal today, with long-term rates higher than short-term rates. This indicates that investors have an optimistic outlook on the economy. However, the yield curve does change over time.
The market is overpriced. Without saying when, Goldman Sachs and Bank of America predict a 0% to 1% return on market investments for a decade or longer. A decade or longer!!
In declining markets, it is best to be in cash. Investors should maintain a 50/50 asset allocation. 60/40, 45/55, or a similar asset allocation also works well. Asset allocation accounts for the largest share of portfolio returns, with the market component represented by SPY.
Security selection and market timing do not contribute to returns.
Best wishes!
