August has been quite the roller coaster for investors. The stock markets went into a "tizzy" in part because of the bond markets and something called an inverted yield curve.
If you don't understand this phenomenon, you are not alone. The inverted yield curve is a confusing and complex topic. In 1986, Duke University finance professor, Campbell Harvey, wrote a dissertation on the inverted yield curve and its ability to predict a recession. At the time, his model had correctly predicted the 4 previous recessions. It has also predicted all three recessions since its publication.
So, does that mean another recession is on the horizon? The answer is...probably. Recessions happen. So do bull and bear markets. But should you worry? That's the big question. At Freedman Financial, we believe our clients' financial plans are built to withstand normal market cycles. And when that's the case, the best course of action is no action at all.
For more details about inverted yield curves, click on the link below. Read how Campbell Harvey would explain his theory to his grandmother.