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The yield on 10-year Treasury notes slipped below the 2-year yield Wednesday morning, trigger fears of a recession on the horizon. The last time such an inversion occurred was 2005, two years before the Great Recession hit. According to Credit Suisse, a recession usually hits within 22 months of an inverted yield.
Fears of a looming recession have been growing in recent months. The US economy has been on a record run of growth since 2009 following the Great Recession. Given the cyclical nature of the economy, a recession is bound to happen sooner or later.
The stock market took the news hard. The Dow Jones Industrial Average dropped as many as 700 points as of the writing of this article. The yield on 30-year bonds fell to a record low on Wednesday. More turmoil is expected in the coming months, especially with a presidential election on the horizon in 2020.
President Trump took to Twitter to blast the Federal Reserve for holding back the economy. The president has leveled mounting criticism of the Fed over the years for raising interest rates. The president went on to defend his trade war with China, claiming the communist nation wasn’t the problem, and that our problem was with the Fed.