The U.S. might be headed for a recession.
In August 2019, the yields on two-year bonds exceeded the yields on 10-year bonds for the first time since 2007. This inverted yield curve is seen as an alarm bell signaling that the economy is heading for a recession.
According to Robert L. Hawkins, a professor in poverty studies at NYU, this can cause people to become concerned about the economy.
“What it means is that the short-term bonds are doing the same of better than the long-term bonds,” he explained. “In plain language, people who are investors are concerned about the economy. They’re concerned how their money will perform over the next few months, maybe few years.”
Hawkins said that, on average, whenever an inverted yield is indicated, there will be a recession in roughly 12 to 14 months. Other indicators include economic disputes with China and unemployment. But he also explained that recessions are sometimes unavoidable, since our economy tends to work in cycles.
“Governments try to offset it or even avoid it. But it’s hard to do because it’s a bit intangible,” he said. “This just happens to our economy. Some things make it better and other things make it worse.”