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Insights from Tom Moran,

AIF® Chairman | CEO | CIO Moran Wealth Management®

lthough investors do not have a crystal ball, certain possibility of a future recession. Economists pay attention to this
economic metrics can help investors and business owners metric because it has reliably predicted the last eight recessions
A make informed decisions on the direction of the economy. consecutively, including the Great Recession of 2008. The three
For instance, leading economic indicators can signal changes in month and the 10 year Treasury yields have been inverted since
the economy before they occur. One of the most well-known October. The two-year and 10-year Treasury note, on the other
leading economic indicators is the Yield Curve, which conveys the hand, does not have a perfect track record of predicting a recession,
relationship between but is still significant, nonetheless. This inversion historically has
short-term and long-term interest rates on treasury bonds. predicted seven out of the eight past recessions. The two-year
Financial experts argue that the slope of the yield curve can Treasury yield has consistently topped the 10 year Treasury note
predict future economic activity. In a normal economic landscape, since July, signaling to investors a recession may be impending. It is
the curve is upward sloping with the short-term rate lower than important to remember that a recession does not immediately follow
the long-term. To understand why, it is useful to think about an inversion. On average, a recession starts 19 months after the curve
treasury bonds as essentially investors lending money to the U.S. inverted.
government. As the maturity of a bond increases, investors expect to With all of this in mind, we remain at a crucial turning point
be compensated for the increased risk of lending their money over in the economy as The Fed carries out its aggressive monetary
a longer period. This relationship between short-term and long- policies to combat inflation. Here at Moran Wealth Management®,
term rates can change, however, with the curve flattening and even we are actively watching for changes in leading economic indicators
inverting. Short-term rates are primarily influenced by expectations including the yield curve and encourage you to reach out to us
of the Fed’s monetary policy, while long-term rates are set by regarding any questions or concerns. You may contact us at your own
investor’s outlook on inflation and economic growth. A normal, convenience on our mainline 239-920-4440 or schedule
upward sloping curve indicate investors predict future economic an appointment at moranwm.com.
health and market expansion. When investors start to anticipate the
economy slowing down in the future, this curve inverts with short- This article contains general information that is not suitable for everyone and was prepared for
informational purposes only. Nothing contained herein should be construed as a solicitation to
term bonds yielding higher than long-term bonds. This yield curve
buy or sell any security or as investment advice to any reader. The article is an advertisement
inversion signals investors have a pessimistic long-term economic for Moran Wealth Management® in its capacity as a registered investment adviser. The article
outlook and are willing to pay a premium on shorter term bonds. contains certain forward-looking statements that indicate future possibilities. Due to known and
unknown risks, other uncertainties and factors, actual results may differ materially. As such, there
Traditionally, economists look at the difference between the
is no guarantee that any views and opinions expressed herein will come to pass. Past performance
three-month and the 10 year Treasury note to determine the is not a guarantee or predictor of future performance.
www.Thomas.Moran@MoranWM.com
Tom Moran Phone: 239.393.8076 www.MoranWM.com
AIF® Chairman, CEO, CIO Moran Wealth Management® Fax: 239.431.5239 5801 Pelican Bay Blvd, Suite 110,
Naples, FL 34108

Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN). Moran Wealth Management is a separate entity from WFAFN. 1221-04126
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