Warning sign of a recession send stock market futures tumbling downward

“The last three times this happened, U.S. recessions soon followed," Bloomberg analyst Joe Wiesenthal writes

Published August 14, 2019 1:33PM (EDT)

 (AP Photo/Mark Lennihan, File)
(AP Photo/Mark Lennihan, File)

This article originally appeared on Raw Story

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.

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.

By Brad Reed


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