US yield curve inverts further but stocks have time to soar

Markets were mixed on Wednesday.

The S&P 500 rose 0.7 percent and the Nikkei 225 rose 0.1 percent but the STOXX Europe 600 fell 0.2 percent.

US Treasury yields fell. The 30-year yield hit an all-time low of 1.907 percent while the spread between the 10-year and 2-year yields inverted further.

“We’re in a fragile equilibrium: rallying bond markets are propping up equity valuations, but the balance holds only if global growth does not break out to the downside,” said UBS economist Arend Kapteyn in a note.

However, Stephen McBride, chief analyst at RiskHedge, wrote in a Forbes article that there is time for stocks to soar.

“From the time the yield curve first inverts, a recession hits 20 months later, on average,” he wrote. “Twenty months is a long time. And in those 20 months after the yield curve inverts, stocks usually perform well.”