Warning sign of a recession send stock market futures tumbling downward

The financial world was hit on Wednesday with a major new red flag about a potential recession that sent stock market futures tumbling downward.

As Bloomberg reports, the yield on the ten-year U.S. Treasury bond has dropped below the yield of the two-year U.S. Treasury bond for the first time since 2007, which many market observers say is a leading indicator of a coming recession.

Advertisement:

Yields on ten-year bonds are usually higher than yields on two-year bonds because there is greater risk involved in investing in a long-term bond, which means investors in those bonds demand higher payouts than investors in short-term bonds.

But when the so-called yield curve inverts — that is, when ten-year bonds actually pay less than two-year bonds — it is seen as a sign that investors believe there are significant risks to the economy and are flooding their cash into safe harbors.

As for what this means for the U.S. economy as a whole, Bloomberg analyst Joe Wiesenthal writes “the last three times this happened, U.S. recessions soon followed.”

Pre-market trading on Wednesday showed futures of the Dow Jones Industrial Average trending downward by 1.44 percent, with the Nasdaq down by more than 1.5 percent.

Read More Here...

Bookmark the permalink.