Analysts are sensing a whiff of fear in the markets as a key indicator is showing a possible recession may be on the way.
They are talking about inverted bond yields.
This is a reversal of the traditional thinking about bonds.
Instead of interest rates improving for investors the longer a government holds their money, an inverted yield shows the relatively low current rates falling in the short-term and then steeply rising, explains investment expert Nigel Green, CEO and founder of one of the world’s largest financial advice firms, deVere Group.
Reassuringly, Green explains in a video that inverted bond yields are not a guarantee of recession, but are one of the best economic indicators that one could be on the way.
Inverted bond yields
“An inverted bond yield does show hundreds of thousands of analysts around the world working for large banks and financial institutions are looking closer at the markets and trade,” he said.
“They are predicting interest rates are going to have to fall because there is likely to be a recession.
“It doesn’t mean it’s accurate, it just happens to be one of the most accurate measures of a recession.
“If you are looking at this and asking what to do as an investor, then markets have already fallen and if you decide to sell, that’s probably not a good idea. The reality is they have already dropped and you are too late to sell.
“What you do is hold and make sure your investments are diversified.”
Green is positive about his investments despite the worry of recession.
“I think we have a short-term sell-off and that means an opportunity. A chance to invest in good stock and to diversify investments. Don’t put your money into one asset class, and make sure you have a good financial adviser to help you with your investments,” he said.
The chaos in the UK may get worst . Personally I believe there are opportunities but I always believe you have to diverse . No one has a crystal ball https://t.co/5Deq22pibX
— Nigel Green (@nigeljgreen) March 25, 2019
“If you come out of the market, it’s difficult to time when to go back in. I can’t think of one successful investor who does this just by timing the market. If you look at all the best investors, they look for quality in their stocks and companies, diversify and stay invested.”