July 08, 2024

What Do Inverted Yield Curves Mean for Your Portfolio?

In this episode of Buckingham Perspectives, Chief Investment Officer Kevin Grogan explains what an inverted yield curve is and the implications for both stock and bond markets.

Considered by some as a leading indicator of a recession, the yield curve has been inverted since July 2022, the longest period on record. This happens when longer-term bonds have a lower yield than shorter-term bonds. Under normal conditions, investors should expect the opposite because investing in longer-term securities means you are tying up your money for a longer period. Practically, an inverted yield curve means that the market expects interest rates to fall. Since the Federal Reserve will typically cut its target rate during an economic downturn, an inverted yield curve often precedes a recession, but it is not a perfect predictor. Although investors may want to consider some small changes to their bond portfolio when the yield curve is inverted, it is not a reliable indicator for trying to time the stock market before a potential downturn.

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For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is based on third-party data and may become outdated or otherwise superseded without notice. Third-party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this information. Please be advised that Buckingham only shares video and content through our website, Facebook, LinkedIn page, and other official sources. We do not post investment advice on WhatsApp, Telegram, other interactive applications, or other similar platforms. Rather, Buckingham provides investment advice only through individualized interactions.



About the Author

Kevin Grogan

Chief Investment Officer

As Chief Investment Officer for Buckingham Wealth Partners, Kevin conducts investment research and writes articles on a wide range of topics, including retirement planning and investment policy. Kevin co-authored "The Only Guide You’ll Ever Need for the Right Financial Plan" with Larry Swedroe and Tiya Lim. This step-by-step handbook focuses on the art of investing by providing investors with information they can use to build a tailor-made investment strategy. Kevin holds an MBA from Saint Louis University and a bachelor’s of science in finance from Missouri State University in Springfield.

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