Short-term cash is back in style with yields sizzling around 5%, but watch out for a Fed policy U-turn, says investment strategist
The inversion refers to short-term yields rising above long-term yields, and such flips warn of a recession. The signal has been flashing since last year, and it contributed to the bear market in stocks in 2022. 10-year Treasury yieldA former market strategy director at BNY Mellon Investment Management, Young said inversions on this measure have preceded recessions every time but once since 1962.
Investors have been worried that the Fed's aggressive pace of rate hikes will eventually tip the economy into a recession, although the strong labor market may be offsetting such concerns for now. But if the Fed were to change course later and start cutting rates, short-term yields would fall quickly, said Young.
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