Should Investors Prepare for an Incoming Recession?

Does a Yield Curve Inversion Signal the Next Recession?

• Yield spread between the 2-yr and 10-yr treasuries briefly inverted last week, one signal of a possible recession
• Another indicator, the 3-mnth and 10-yr rate spread, which takes more pressure to invert, has not flipped
• Currently no guarantees of incoming recession

Greater Risk for Yield Curve Inversion Expected

• Fed’s aggressive approach to tackle inflation involves raising interest rates 7 times this year
• Could put upward pressure on short-term rates, increasing interest rate volatility and raise risk of yield curve inversion
• Recession is possibility but should not be primary concern

What Investors Should Consider for Investment Strategies

• Strong economic growth and low unemployment rate will help mitigate impact of a potential recession
• Investors should instead factor rising inflation and interest rate hikes into their investment decisions
• Consider CRE that can raise revenues to mitigate inflation and lock in fixed interest rates for loans

*Through March 31
Sources: Marcus & Millichap Research Services, Federal Reserve

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