Inverted Yield Curve – How to Adjust Your Portfolio

Written by Donnie Nguyen

March 24, 2019

The S&P 500 is off 0.77% this week as investors worry about the inverted yield curve. Rates on 10-year Treasuries fell below rates on 3-month Treasuries. The inverted yield curve has predicted the last 7 recessions.

The Fed met on March 19-20. They decided to hold their benchmark federal funds rate steady. They also announced their plan to end their balance sheet runoff in September. The stock market surged the day after this news, but was grounded on Friday’s news of the inverted yield curve.

I’m very much a stats guy, so the inverted yield curve does disturb me a little. There are 2 key adjustments I may make to my strategy to account for this new information.  

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  1. Increase my emergency fund
  2. Wait for a 20% drop in the market instead of 10% before putting my money to work
  3. Allow my cash equivalents to go a little higher than normal

So how are you guys handling the inverted yield curve? Share your thoughts by commenting below.

Disclosure

I wrote this article myself and it expresses my own opinions. I’m not receiving compensation for it (other than from Wolves Of Investing), and I have no business relationship with any company whose stock is mentioned in this article.

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