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Inverted Yield Curve Sparks Recession Concerns
During the last week, global equities struggled while the bond complex rallied on global growth concerns. Financial news outlets focused on yield curve inversion as a sign of impending recession. Yield curve inversion is but one piece of data and cannot be relied upon to predict recession. It is important to examine economic conditions more broadly in order to gauge whether recession is a concern. The economic indicators section of this notebook attempts to provide a broader picture. The “picture” that is being painted is definitely one of caution. Within several days, The Conference Board will release the Leading Economic Index for the U.S. based on data from July. Should the index show a second month of contraction, then investors should be on alert for deteriorating economic conditions. While it is ok to think about and plan for a recession, taking defensive action too early is as much of a risk as taking action too late. Furthermore, a well constructed portfolio may require no action at all, which is the true definition of passive investing.
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