Hey everybody welcome back to whiteboard Finance my name is Marco and I'm here to Help you master your money and prepare For the next upcoming recession based on This indicator uh thanks to policy Genius for sponsoring this video but More on that later so we're sitting in a Deeply inverted yield curve which is Typically preceded every single Recession since the 1980s and also if The yield curve remains inverted for I Believe 90 days or more it's 100 been an Indicator that a recession is coming uh Within the next I'd say 0 to 18 months Which I'll show you in this video so if You didn't watch my last video where I Bought fifty thousand dollars worth of T Bills and I briefly mentioned the yield Curve uh go check that video out but for Those of you that don't know what the Inverted yield curve is I'll explain This very quickly so the inverted yield Curve is actually the unusual drop of Yields on longer term debt going below Yields on shorter term debt of the same Credit quality so if you just look at This very simple chart right here on the Y-axis you have yield basically what You're yielding for that asset are for That debt and then on the x-axis you Have maturity meaning how long is this Thing going to come until maturity so if You remember in my last video with the T-bill video like the 30-year Bonds were
Significantly less than like the four or Eight week T bill of the same credit Quality so let's take a look at how we Even measure this or you know let's look At real life examples of what an Inverted yield curve is so the way they Measure this and this is from the St Louis Federal Reserve this is completely Updated right here we have the 10-year Treasury constant minus the two-year Treasury constant so typically the Tenure should be yielding more than the Two-year and when it doesn't that Typically signifies something wrong with The plumbing of the economy or the Plumbing of the financial system there's A reason why these things become Inverted and again this is why it's such A good indicator of upcoming recessions So if you look at this black line This Showing you zero percent okay that's Right dead smack in the middle this line Should usually be above the blue line Should be above the black line and when It goes below it that is when the yield Curve is indeed inverted so if you take A look at these gray bars these indicate Recessions and if you look at the Thickness of the gray bar that just Shows you how long the recession lasts So let's take a look at these real life Examples so the yield curve becomes Inverted right around let's say October Of 79 uh dip it dips down even lower but
Then you have the recession starting in Basically January of 80. if you look at This yield curve it dips down to Basically July of 81 recession starts Right around there if you look at here You have the yield curve dipping down in March of 89 recession starts and Basically July of 90. this example for The.com bubble yield curve becomes Inverted March of 2000. uh March of 2001 That's when the recession officially Starts uh this one the November of 2006 The great financial crisis inverted Yield curve happens in November of 06 Financial crisis starts right around November December of 2007. uh and then Very quickly we did have a brief Inverted yield curve in August of 2019 And then we had cerveza sickness which Was a very short-lived recession but it Was in fact a recession itself so if I Go all the way to today if I go to February of 2023 we're sitting at Negative 0.77 this is the steepest the Yield curve has been inverted uh since Basically uh September of 81 okay so you Can do the math on that 42 years later So what does this mean are we still Dipping is the yield curve going to Become more inverted and what happens After this okay so very quickly let's Take a look at this short video to show You how deeply the yield curve has Become inverted so if you take a look at
This chart on the y-axis these are euro Dollar Futures yield the percentage on The x-axis this is time okay so you can See it starts in 2023 which is this is Where you should be focusing on and it Goes all the way out to 2031 and you can See here this source is from Barchart.com this was actually done in November of Um 2022 so if you look at the top right Hand corner you can actually see the Date right here moving uh right now We're basically in the summer of 2022 And this will go until basically about November of 2022 so this video is a Couple months old but it hammers home The point if you look at these colors Down here in the bottom right the more Red it gets or the more orange it gets That means the yield curve is becoming More inverted which you can see right Here so it stops at November 2nd which Is above five percent we've only gotten More and more deeper since then so in The next slide I want to talk to you About the last eight recessions being Preceded by an inversion of the yield Curve but what I want to talk about is The lead when it starts versus versus When the recession actually starts after The yield curve inverts but before that Let's get into a word today from our Sponsor policy genius if you have a Family you know how much your loved ones
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Insurance quotes and see how much you Can save okay thank you for sitting Through that it helps me pay the bills Haven't asked you guys for anything in Five years of doing this so thank you For that so let's take a look at this Chart from Charlie Bello so you can see Right here the inverted yield curve Which we just talked about this is the 10-year minus the three month so you can See right here we have the recession Starts so you have January of 70 December of 73 February of 80 going all The way to March of 20. right now we're Sitting in these question mark boxes you Can see when the recession ends you can See if the inverted yield curve was Happening before the recession it's yes For all of them and then you can see When the first yield curve inversion Happened so the this is what I want to Talk about in this slide so for the 70 Recession it actually inverted in November of 65 so this was 50 months for The 73 recession you can see it inverted In June of 71 which was 30 months for The February 80 recession it actually Inverted in August 78 so this is 18 Months so a year and a half and then the Rest are right around a year year and a Half almost two and a half years then You have two years then you have one Year so our first yield curve happened Based on this chart based on the 10-year
Minus the three months this happened in October of 2022 so if we're sitting in February of 2023 you can do simple math You have October November December January February so we're sitting at About five months right here okay this Is basically telling us that anywhere From uh six to I don't know 40 months From now we're going to see some sort of Recession so I know that isn't you know A crazy tight time period but just based On these numbers more realistically it's Probably going to be anywhere from 11 to 30 months so this may happen in 2024 it May happen in 2023 we just don't know But I think this is an important chart To give you some realistic expectations So this next chart isn't specifically About the yield curve but it is a super Important factor which I've talked about Some of my videos in the summer when I Was doing them with my research analyst Joe consorti this is a huge indicator This is United States ISM Manufacturing New orders you can see when it dips Below this yellow bar right here you can See some severe recessions so you have The stagflationary recession this was in Basically 74.75 then you have the double Dip recession you have the Savings and Loan crisis you have the tech bubble in The 2000s you have the great financial Crisis right here in 070809 then you Have the cerveza sickness which we
Talked about we are now reaching down Below those levels again so this added Into the mix with the inverted yield Curve is basically another strong Recession and indicator this is another One I wanted to talk about this is the U.S yield curve versus economic cycle Indicators so the black line is the U.S Yield curve this is the 10-year minus The two-year which I showed you earlier From the St Louis fed and then the blue Line is the unemployment rate so the Interesting thing is you can see how Unemployment Ebbs and flows over time But it almost always follows the yield Curve which is pretty interesting or Vice versa it's almost like a one-to-one Relationship except for right here in 2003 and then also right here in like 19 Or 20 but this was a huge Global Pandemic so this one's kind of an Outlier but you can see pretty much Since 85 they've pretty much been one to One so when you see this dipping below You know it's almost another indicator Of hey what's going to happen to the Unemployment rate right well right now We're sitting at a super low Unemployment rate which is typically Preceded by a recession Uh and then finally this is James lavish He just posted this you know a few hours Ago Um he's just basically reinforced and
Reinforcing what this whole video is About so he talks about how when the Yield curve inverts which are the red Areas uh and 12 to 18 months later we Typically have a recession which are the Blue areas he says it looks like Clockwork so he's saying that they Inverted on July 5th I'm not sure what Type of yield curve he's using I think He's using the 10-year two-year because You can see right here in the where my Cursor is that's what it says Um the other one said October but either Way we're somewhere in that 24 month Range where recessions do happen once The yield curve inverts so uh this video Is not meant to be like fear-mongering Or anything like that my whole channel Is about just educating you some people Already know about the yield curve some People have no idea what the old curve Even is but charts have proven time and Time again that when this thing inverts And inverts for a long period of time uh Specifically 90 plus days which we're Definitely at it's been 100 percent of a Recession coming shortly thereafter so Again it may be 12 to 18 months later Maybe 30 months later we're already Sitting in about five months I mentioned Earlier so it just depends you guys so What I would like to know in the Comments down below what are you guys Doing how are you planning are you guys
Sitting on the sidelines are you guys Investing are you dollar cost averaging Um are you are you building your War Chest what are you guys doing with your Money Um based on my last videos you can Already see what I'm doing with my money I dollar cost average every week because I don't have a crystal ball but I'm also Sitting on a lot of dry powder and I Also bought 50 Grand worth of tea bills Yielding right around 4.7 percent risk Free so you may want to look into Um if you're if you're scared to invest Or if these types of you know recessions Scare you it's actually the opposite That's when you should be investing the Most heavily but based on human Psychology you know people do the exact Opposite they buy in when things are Skyrocketing and they Panic sell when Things are going down uh so let me know In the comments below what are you guys Doing to invest thank you so much and Have a prosperous day
