Adam S. Parker, Ph.D.
September 21, 2022
We have been surprised that during recent meetings the subject of the inverted yield curve rarely surfaces. The market sell-off earlier in the year was at least partially the result of a higher probability being assigned to stagflation. The 2-year, 5-year, and 10-year yields have been fully inverted since July 5th (it was April 1st for the 2-year vs. the 10-year) and the market sold off hard in anticipation. Of the nine inverted-curve cycles in the last half century, SP500 returns this cycle have been the most volatile, indicative of the differing paths that may unfold, and the challenge to forming an “inverted yield curve playbook” for equity investors.
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