“In an effort to combat inflation, the Federal Reserve, or Fed, has aggressively hiked interest rates in 2022 in an attempt to cool down the economy,” says Mark Andraos, associate portfolio manager at Regency Wealth Management. “The reality is, the Fed can really only control the short end of the yield curve, which is why we’re seeing such an inversion.”
“Most market participants believe that an inverted yield curve is an indicator of an upcoming recession, but there is an old expression that says five out of the last four recessions have been predicted by an inverted yield curve, meaning it’s not exactly the greatest indicator of an upcoming recession,” Andraos says.