#111: Yield Inversion Before and After

Pinned Note: Over the next week or so, my focus will be on advancing the web portal development, so these letters will be done quicker than usual. The depth of analysis, therefore, might not be up to my usual standard.

The chart below shows the before and after of when the 10-year Treasury yield drops below the 2-year yield. The black line is an average of the 8 times the yield has inverted in the last 25 years. You can see that the S&P500 typically trends up in the year before the inversion and also trends up in the 2 years after. However, there is a lot of variability in the individual event performance after an inversion.

The point I am trying to make is not all inversions are equal.

When you’re engaged in a profession or sport where your effort directly correlates with your success, it can be challenging to take a break. For instance, as a psychologist, not working means not earning. Similarly, for a professional golfer, not playing equates to a loss of income. However, to perform at an optimal level, it’s crucial to occasionally take a break and recharge. This is often difficult because it may seem counterintuitive that taking a break could enhance overall productivity.

I’ve been visiting family in Melbourne for the past few days and taking it easier than usual, which I’ve found challenging. Despite this, I feel much more energized and optimistic about the future by changing my environment and slowing down a bit.

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