Market Update: March 30, 2022 Yield Curve Inversion Makes The Market Nervous

Tom Vaughan is a Certified Portfolio Manager and CEO of Retirement Capital Strategies. Retirement Capital Strategies is a registered investment advisor located in San Jose, California.

The opinions voiced in these presentations are for general information only and are not intended to provide specific advice or recommendations for any individual(s). The information provided herein is obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness. Statements and opinions are subject to change without notice. Asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Accordingly, you should not rely solely on the information contained in these materials in making any investment decision as the material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned in this presentation. Before acting on information discussed in this presentation, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment advisor. Prospectuses, investment objectives, risks, charges and expenses of any investment product should be reviewed carefully before investing. This platform is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Retirement Capital Strategies and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Tom Vaughan or Retirement Capital Strategies unless a client service agreement is in place. “Likes” are not intended to be endorsements of our firm, our advisors or our services. Please be aware that while we monitor comments and “likes” left on this page, we do not endorse or necessarily share the same opinions expressed by site users. While we appreciate your comments and feedback please be aware that any form of testimony from current or past clients about their experience with our firm is strictly forbidden under current securities laws. Please honor our request to limit your posts to industry-related educational information, comments and questions. Third-party rankings and recognitions are no guarantee of future investment success and do not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor by any client nor are they representative of any one client’s evaluation. Investment positions mentioned in these videos may be held in some of our existing portfolios. Tom Vaughan and Retirement Capital Strategies are unaffiliated and separate from those companies whose investment positions are mentioned and is not liable for their products or services.

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Transcript:

Tom Vaughan:

Everybody, welcome to Wednesday, the S&P 500 was down point 6%. Today, we’ve had this huge run up going on now for two and a half weeks, finally had a little bit of a pullback today, actually think these types of things are positive, you need to get these pull backs to get kind of new buyers to come in to get us to the next levels. And so I’m not unhappy with what happened today, personally, we did see some information about what’s called the yield curve. And they look at a 10 year Treasury versus a two year treasury, theoretically, a 10 year Treasury should be paying a lot more than a two year Treasury because you’re having to wait a lot longer to get your principal back. But sometimes they get what’s called inverted where you actually get paid a little bit more on the two year than you get paid on the 10 year. And what the bond market is essentially saying in that environment is that they’re not that confident about the future. And so we see these inversions that happened before recessions. And so this is what you’re going to be hearing about quite often. And for a couple of seconds, on Tuesday, we had an inversion where the two year paid a little bit more than the 10 year. And so the market is kind of absorbing that. And it probably had something to do with some of today’s action as far as that goes. But if you look back historically, really, you need to see that inversion for two or three months before you really start to see some concrete evidence that you might be heading toward to recession. And the average time between inversion and recession is about 18 months. And in most of those timeframes, the market still did quite well, in that timeframe also.

So I would be a little bit cautious about trying to use this as some kind of a big signal personally. And I also feel like right now you have to be very cautious because the Federal Reserve has so much money invested in these treasuries and what have you, as they tried to unwind their balance sheets, and there’s a lot of different things that are happening that aren’t normal in a situation where you’re trying to look back historically and say, okay, inverted yield curve means XYZ. I’m not sure that’s true right now, so I’d be very cautious. I’ve also heard a lot of people, including myself, who much prefer the three month Treasury versus the 10 year Treasury, and that yield spread is actually quite high right now. So there is a little bit of an anomaly happening here, in my opinion, but nonetheless, we’ll see how this plays out. I think the market is okay. Very happy, what’s happening, really good momentum going forward. Again, don’t be surprised to see more pullback. And I think that’s probably very, you know, important. We had almost a 15% drop in the S&P 500, from high to low, not going to make that all back in a few weeks. Most of the times it takes some time, a few downturns here and there before it finally crawls back up. Seems to be what we’re doing so far. We’ll see what happens going forward, but really looking forward to seeing what’s gonna happen tomorrow, and I’ll talk to you that thank you very much.

Tom Vaughan is a Certified Portfolio Manager and CEO of Retirement Capital Strategies. Retirement Capital Strategies is a registered investment advisor located in San Jose, California.

The opinions voiced in these presentations are for general information only and are not intended to provide specific advice or recommendations for any individual(s). The information provided herein is obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness. Statements and opinions are subject to change without notice. Asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Accordingly, you should not rely solely on the information contained in these materials in making any investment decision as the material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned in this presentation. Before acting on information discussed in this presentation, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment advisor. Prospectuses, investment objectives, risks, charges and expenses of any investment product should be reviewed carefully before investing. This platform is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Retirement Capital Strategies and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Tom Vaughan or Retirement Capital Strategies unless a client service agreement is in place. “Likes” are not intended to be endorsements of our firm, our advisors or our services. Please be aware that while we monitor comments and “likes” left on this page, we do not endorse or necessarily share the same opinions expressed by site users. While we appreciate your comments and feedback please be aware that any form of testimony from current or past clients about their experience with our firm is strictly forbidden under current securities laws. Please honor our request to limit your posts to industry-related educational information, comments and questions. Third-party rankings and recognitions are no guarantee of future investment success and do not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor by any client nor are they representative of any one client’s evaluation. Investment positions mentioned in these videos may be held in some of our existing portfolios. Tom Vaughan and Retirement Capital Strategies are unaffiliated and separate from those companies whose investment positions are mentioned and is not liable for their products or services.

By participating in any of these live streams, you agree that any questions submitted by you might be used by us in the future on this YouTube channel. We will not share your personal information.

If you have questions, please write to us at: asktom@talkmoneywithtom.com.

  • MoneyGuidePro®
  • Advent Software/Black Diamond Reporting
  • Riskalyze, Inc.
  • thinkpipes®
  • Right Capital
  • YCharts, Inc.