Recession signal from bond yield inversions could prompt portfolio rebalance: Experts
TORONTO - Talk of an upcoming recession is raising angst after a closely watched indicator flashed a warning sign, but experts say it could be a needed spark for investors to take a more active look at their portfolios.
Concerns about recession surfaced in recent weeks after inversions in the yield curve for U.S. bonds, a frequent indicator of an economic downturn. The yield curve briefly inverted a couple of times last week for the first time since 2019. It remained inverted Monday but reversed course slightly a day later. By Thursday morning, the two-year rate was 2.453 per cent and the 10-year was 2.664 per cent.Inversion of two and 10-year bonds is just one measure. A more accurate predictor of recession is an inversion of the three-month and 10-year bonds, says Jules Boudreau, an economist at Mackenzie Investments.
“We’ve seen the yield curve flatten dramatically many times in the past without producing a recession.” “And then it’s just about adding appropriate diversification to get that balance of growth and some protection against inflation, which equities, particularly high-quality equities, can provide that protection against inflation over time,” he said.
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