FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., August 6, 2019. REUTERS/Brendan McDermid

The spread between two- and 10-year Treasury yields fell below zero, something that’s preceded each of the last seven recessions.
Its also a sign that US equities will peak, according to analysts at Bank of America Merrill Lynch.
However, when the S&P 500 will top is unclear. According to historical precedent, it can happen in as little as one month or take more than a year.
Watch the S&P 500 trade live on Markets Insider.

The yield curve’s most recent inversion is the latest signal the days of blockbuster growth in the S&P 500 are numbered, according to analysts at Bank of America Merrill Lynch.

The US equity benchmark is an important future indicator of US recessions, the analysts wrote.

“The typical pattern is the yield curve inverts, the S&P 500 tops sometime after the curve inverts and the US economy goes into recession six to seven months after the S&P 500 peaks.”

This pattern has occured before the last seven recessions, the analysts said. That means that there’s a peak on the horizon for the S&P 500. But it’s difficult to pinpoint exactly when it will happen.

“Sometimes the S&P 500 peaks within two to three months” of an inversion between the two-and 10-year Treasury yields, the analysts wrote. But they also note it can take one to two years for the market to peak after an inversion.

In the last 10 inversions, from 1956 to present, the S&P 500 hit highs within three months six times, according to Bank of America. The other four times there was a yield curve inversion, it took 11 to 22 months for the S&P 500 to peak.

This doesn’t mean that the analysts are predicting an immediate S&P 500 meltdown, or saying that growth isn’t possible in the near-term. …read more

Source:: Business Insider


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