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Brace for a 15% plunge in S&P 500 next year if the Treasury yield curve fully inverts

Sunny Oh
Brace for a 15% plunge in S&P 500 next year if the Treasury yield curve fully inverts

Parts of the U.S. bond market are seeing short-dated yields push above their long-dated peers, a “warning sign” for the stock market as Wall Street’s economic expectations for 2019 deteriorate. Jones and others are worried that if this gap continues to narrow, more losses will follow for the S&P 500 (SPX) which has already been retreating from its October highs. “History suggests that once the Treasury yield curve becomes very flat or starts to invert, the stock market tends to struggle over the following couple of years, as the economy eventually starts to weaken,” said Jones.