Inverted yield curve - is it time to reconsider investing in shares

icypear

Been reading about the invester yield curve today (when long term bonds are paying less than shorter term), this has been used as an indicator that we could be heading into reccession and it could be a consideration to pull out of equities and into cash.


How is everyone feeling about their investments in shares - are you happy to sit through a recession hold out of a possible strong drop?


https://uk.reuters.com/article/us-usa-economy-yieldcurve-explainer/explainer-what-is-an-inverted-yield-curve-idUKKCN1R32N0

Mr.Saver

You can often find tons of news or articles saying we are heading toward a bear market, and the same time you can also often find tons of news or articles saying the opposite.

What do you believe? I believe neither.

seacaitch

icypear wrote: »

How is everyone feeling about their investments in shares - are you happy to sit through a recession hold out of a possible strong drop?

1. Why are you asking this question? Are you a novice investor who's nervous about an uncertain future?

2. The fact that you're relying upon a Janet & John style explainer re the yield curve suggests you are in very unfamiliar territory, where a little knowledge may be dangerous. Do you think the millions of investment professionals in the world are unaware of the inversion, and that you're somehow ahead of the game? NB rhetorical question.

3. Given 2 above, the likelihood (probability) of you being able to effectively navigate your way through a coming economic period, whatever it holds, via active management of your investments, is very low. Whereas, the probability is high that active investment management by you would prove detrimental.

4. Very probably, therefore, the correct response to uncertainty about the future (see 1 above) is to have a well-considered investment plan and a suitable asset allocation to meet the plan's goals. Focus on that and, unless you are exceptionally skilled or lucky, learn to ignore the news, because it will invariably have you overtrading and ruining your long term returns. Learn to cultivate a certain zen-like detachment.

mrfourcreditcards

All a share price drop means to me is shares on sale! Depends on what you are investing for really and how soon you need to access the funds.

talexuser

Yes, the yield curve is a historical indicator, and we must have a correction at some time. After 10 years of bull run it is ridiculous to say we won't. The latest ~20% drop could be it, or it could be a forewarning or a worse one, after all world debt is still climbing and cannot go on forever.

Is it time to sell up? No. Many back calculations show that time in the market is more important than timing the market. To time the lowest point you have to be incredibly lucky. You should be invested to withstand a 40% or 50% drop without having to cash in, and be able to wait a couple of years for any drop to be back in positive territory.

dealer_wins

For the last 8 years I keep reading people saying theres gonna be an imminent crash. Anyone heeding these warnings would have lost a lot in dividends and growth.

Kendall80

I am carrying on investing as normal until 6 months after any 10yr, 2yr yield curve inversion. Then I will start increasing my bond allocation and cash reserves.

davidquizer

I've been investing for quite a few years in investment trusts and unit trusts, I don't do individual shares as it can be quite risky. I use Hargreaves and Lansdowne and even in the current uncertainty, I'm still making money. Its like everything in life choosing quality, I've done very well with Scotting Mortgage and Lindsell Global, 2 very highly rated funds which delivery really good results.

Thrugelmir

icypear wrote: »

How is everyone feeling about their investments in shares - are you happy to sit through a recession hold out of a possible strong drop?

Hold the shares and reinvest the income. There's always value to be found in the markets (as a private investor) if you are happy to spend time panning the water. Timing the market is a nigh impossibility.

Though would add the caveat as to ones own investment time horizon. Anything less 10 years I'd certainly be more cautious. As not just the inverted yield, but a whole host of other negative factors. Storm clouds rarely gather without some degree of volatillty occuring. Sometimes simply not losing capital value is a bonus.

Thrugelmir

davidquizer wrote: »

I've done very well with Scotting Mortgage and Lindsell Global, 2 very highly rated funds which delivery really good results.

Conviction investing can very easily turn sour.

Alexland

Nice clear explanation video by Dan Kemp of Morningstar who always seems very relaxed about these things.

http://www.morningstar.co.uk/uk/news/186594/can-bond-yields-really-predict-recession.aspx

Alex