This month, Jason discusses a comparison to the 1970s, the yield curve inversion and previous recession returns.
COMPARING THE 1970s
A war (the Arab-Israeli conflict of the 1970s, the Russia-Ukraine war today) roiled global markets and spiked energy prices
Accelerating inflation due to excessive money printing and government spending
Growth stock valuations coming down while value stocks outperform
Small Caps outperformed when the 1973/74 inflation shock ended
YIELD CURVE INVERSION
The 2-year/10-year Treasury yield spread fell to its lowest level since 1981 before settling in at about -44 basis points (as of 11/7/2022)
Historically, an inverted yield curve has been a reliable indicator of recession within about a year
Would imply that the Fed would be cutting rates before the end of 2023.
A recession is 2 successive quarters of negative economic growth
Since 1953, the average length is 10.3 months
Markets look ahead while economic data looks behind
Every recession is different