Yield Curve Inversion Remains a Concern as Nasdaq 100 Eyes Further Upside
The Federal Reserve is gearing ready for another meeting next week, and it's highly likely that they will raise interest rates by 25 basis points. Lately, the inflation data has been quite positive, showing faster-than-expected declines.
As a result, the Fed might view this rate hike as the conclusion of their monetary tightening efforts. The market has already taken this into account, as seen in the decline of the U.S. dollar and the increase in risk appetite.
Nevertheless, there are still concerns on the horizon. The inverted yield curve is sending signals of a potential recession in the United States. This pattern has consistently preceded recessions over the past 40 years. The big question now is whether history will repeat itself once again.
Almost everyone expects a 25 basis point rate hike next week. Anything other than that would come as a major surprise, going against market expectations. Such an outcome would mean rates break through the peaks of 2006 and reach the highest levels since 2001.
Source: www.cmegroup.com
According to the same forecasts, we won't see any more hikes until the end of the year, which means we're likely to experience a plateau lasting at least five months. The only thing that could change the Federal Reserve authorities' perspective is a potential spike in inflation. The Fed's meeting is scheduled for July 26, so until then, the market might trade muted amid low volatility as we await the statement from the FOMC members.
The U.S. Treasury bond yield curve has been a recurring topic in analyses and discussions for the past few months. This isn't surprising, as this indicator has accurately predicted recessions in the U.S. economy for the past 40 years.
Therefore, when this signal
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