The yield curve inverting has dominated headlines recently for good reason; it’s the only economic indicator that has a perfect track record of predicting a recession.
A steepening yield curve signals that investors have positive expectations for economic activity, and a flattening yield curve means the opposite. Shorter-term rates are surging higher as traders prepare for a number of rate hikes this year. Meanwhile, longer-term rates aren’t rising as quickly, signaling that investors anticipate higher rates will slow down the economy.
The indicator is observed when shorter-term rates are above longer-term ones, and every time that’s happened since 1955, the economy went into a recession between six and 24 months later.
The current shape of the yield curve, however, is a signal of what is already known to investors: Inflation is too hot, and growth is going to moderate.
Investors looking to gain exposure to event-driven investments, which are largely dependent on a number of identifiable variables, as opposed to market conditions, should consider the Merger Fund (MERFX).
Merger arbitrage strategies have historically provided attractive absolute returns with lower volatility and minimal correlation relative to traditional stock and bond strategies, making for a powerful portfolio diversifier.
Introduced in 1989, MERFX was the first mutual fund devoted exclusively to merger arbitrage, offering easy access to a time-tested alternative investments strategy with all the benefits of mutual fund investing.
For more news, information, and strategy, visit the Alternatives Channel.