Futures Measures

Yield Curve Inversions & The Stock Market

Futures Measures

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Yield Curve Inversions occur when short-term interest rates surpass long-term interest rates; the traditional way to gauge this is 2 YR yields against 10 YR yields.

Inversion usually comes on the back of an increase in short yields, which comes from Fed activity, and stagnant long yields.

An inversion tends to not last very long, only go so far inverted, and be followed by lower yields across the curve.

Poor economic data usually follows at some point after/during the inversion.

Large downturns in stocks/economic recessions have followed yield curve inversions with a lagged effect.

However, trading with the intention of betting on a yield curve inversion or a possible economic recession can be difficult due to the unpredictable lag seen and the lack of a large number of historical occurrences.

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