Inverted Yield Curve?

There’s been an increase in chatter within the investment community lately about the risks of an inverted yield curve and its potential to serve as a signal for market tops. Where are we at now? Investopedia defines an inverted yield curve as “an interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the same credit quality…and is considered to be a predictor of economic recession.” Take a look at the following graphs:

Here’s the inverted yield curve at 2000’s S&P 500 top…

…and a more normal yield curve at the ’03 subsequent market bottom…

…and the top in ’07…

…and bottom in ’09…

…and here we are at the end of ’17…

It doesn’t appear short-term interest rates have crested 10, 20 or 30-year treasuries yet, but with the Fed well into it’s tightening cycle, we believe it’s just a matter of time. Stay tuned!