Even if one portion of the yield curve inverting is the sign of a looming recession, investors still have time, if history is any guide. Say the unthinkable happens and the two-year Treasury rate rises above the 10-year one. In the past times that’s happened since 1978, the S&P 500 kept on going up for 19 more months on average, clocking a 22 percent return, data compiled by LPL Research show.
Stocks sure looked like something was bugging them in the fourth quarter, when $5 trillion was erased from U.S. share values. One was the impact on earnings from President Donald Trump’s trade war. A bigger concern appeared to be Powell’s Fed, which has since walked back plans to raise rates as many as two times in 2019.
“These kind of sell-offs are part and parcel within a more secular bull market -- this is your typical bull correction,” said Max Gokhman, the head of asset allocation for Pacific Life Fund Advisors. “After you get out of that, it makes sense to resume a rally. The biggest thing is the two key risks that came to a head in December have lessened.”
This article was provided by Bloomberg News.