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We've seen some dramatic price swings in the market over the past few weeks.
And while many are hoping for a brighter (and less volatile) future, I wouldn't hold my breath.
You see, one of Wall Street's most reliable "fortune tellers" is pointing all signs towards an ill-fated future.
But that doesn't mean you have to fall victim to these wild market moves.
Here's how you can cash in on the market, regardless of what the future holds…
A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality but differing maturity dates. The most frequently reported yield curve compares the three-month, two-year, five-year, 10-year, and 30-year U.S. Treasury debt. This yield curve is used as a tracker for other debt in the market, such as mortgage rates or bank lending rates, and it is used to predict changes in economic output and growth.
And over the recent weeks, it has flattened out significantly – flashing strong signals that slower growth is ahead for the markets.
On top of this, the gap between the two-year and 10-year Treasury yields continues to get closer and closer to inverting. Now, inversion is when short-term rates are higher than long-term rates. This may not seem like much, but this inversion has happened prior to every U.S. recession over the last 50 years. And the spread hasn't been this narrow since just before the Great Recession.
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Now, if you've been watching the markets closely lately, you might have noticed that there has been some major sell-off action occurring. And this can be attributed to the current yield curve climate. Investors are becoming increasingly nervous and heading for the exit before the economic doom strikes full force.
But while this nervousness may be justified, many analysts are more concerned about investors overreacting.
You see, while the shorter end of the yield curve might be inverted, the more reliable part of the curve has not. And while it might have come close, close only counts in horseshoes. The yield curve is more like an "off/on" switch – there's really no in-between.
Regardless of what's to come for the market though, we've talked about this mass-induced fear of missing out (FOMO) that's currently plaguing the market. And we know better than to even entertain it.
When the markets are constantly rising and falling, it can be hard to decide when the "right time" is to buy into a stock. And this, paired with the "economic doomsday" – the FOMO becomes even more heightened…
But if I can give you any advice, it would be this:
About the Author
Tom Gentile is one of the world's foremost authorities on stock, futures and options trading.
With more than 25 years' experience trading stocks, futures, and options, Tom's style of trading systems and strategies are designed to help individual investors propel themselves past 99 percent of the trading crowd.