In 2019 —and previously during 1995 and 1984, as well as in the 1960s— the Federal Reserve switched from raising interest rates to lowering interest rates to prevent an economic slowdown from turning into a full-blown recession.
Also, the yield curve inversion has not been a good “sell signal” for stocks and credit in the past. The previous expansion ended due to the impact of the COVID-19 crisis and not due to an economic deterioration predicted by the yield curve.
If the rate hikes happen as expected, the U.S. economy will have all the hallmarks of a late cycle and will not have a large cushion to guarantee GDP growth, TwentyFour AM associate Mark Holman explains.
“This is the typical late-cycle position that investors face,” he concludes.
