The Best Investment Ideas for a Yield Inversion

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The Best Investment Ideas for a Yield Inversion

(New York)

The yield curve is very close to inverting, an action that is widely considered to be the strongest and most reliable indicator of a forthcoming recession. Investors are afraid of it, and with good reason. So what is the best way to approach one's portfolio as a dreaded inversion looms? The first tip is to re-evaluate any bank stocks you own. Banks become less profitable as the yield curve flattens, so they could see some big losses. Secondly, mentally prepare that returns over the next five years are probably going to be a lot lower than in the previous five. Be selective with your purchases and be defensive. Finally, don't be too afraid to buy stocks you have a high conviction on, and that hold strong risk/reward profiles.

FINSUM : These seem like sound tips. Another obvious one is to buy stocks and bonds that will perform better in this kind of environment, such as strong dividend growing stocks or floating rate bonds.

  • yields
  • rates
  • fed
  • inversion

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Bonds

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