The Inverted Yield Cover

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FOR EDUCATION ONLY

I believe in dollar cost averaging, but do not follow all the narrator’s ideas. The inversion of the yield curve is generally regarded as a warning sign for the economy and the markets.

Historically, an inverted yield curve has been viewed as an indicator of a pending economic recession. The 1929-1932 Depression was preceded by a yield-curve inversion, and seven of the nine bear markets since 1950 were preceded by a yield inversion.

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The Bear Market of 2000-2002:

Max. Pullback: 49.1%

Start: March 27th, 2000

Bottom: October 9th, 2002

Recovery: May 30th, 2007 (31 months to bottom – 56 months for recovery)

Catalyst: Dot-com crash, 2001 recession, 9/11.

The yield curve inverted briefly in June 1998, nearly 3 years before the official start of the 2001-2002 recession.

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