On Monday, for the first time since before the 2008 global financial crisis, the U.S. Treasury yield inverted. The difference between the two-year Treasury and the 10-year Treasury is at its slimmest since the summer of 2007, and the five-year and three-year Treasuries have already inverted. Considering that every recession since at least World War II has been preceded by inverted Treasury yields, this sign should be concerning to many.
In the world of interest rates, Federal Reserve Chairman Jerome Powell might be proving that he is out of his depth with his dovish shift to nearing-neutral rates. Just last month he was quoted saying that the key interest rate was still probably a “long way” from the neutral level. What changed? Only time will tell if interest rates continue to rise or pause as Powell attempts to find his bearings.
Currently the gold spot price is $1,239 an ounce and the silver spot price is $14.55 an ounce. When gold and silver are range-bound (in what I perceive to be the low end) and signals like volatility in the stock market, an uncertain future of continued economic growth in regard to interest rates, and inverting Treasury yields occur, the next pullback or recession may not be far behind.
Do not wait to hedge your clients’ portfolios with an undervalued, currently contrarian investment that has historically proven itself to offset these bubbles.