Thoughts
When the frick is the yield curve going to un-invert.
Okay so there's such a thing as government bonds. Basically, you give the government $100 now, they give you $105 in a year. The percent increase is called the yield (5% in this example). The other variable is time. Is the government going to give you your money back in 1 year or 10 years. And other people can issue bonds, not just the government, but "the yield curve" refers to US treasury bonds. So what is it? Well, it's a graph of the yield versus the holding time. See, normally you want your money back sooner—this gives you more flexibility. (You'd rather have $105 in 1 year (5%) than $150 in 10 years (5%). (I'm assuming no compound interest, so this is wrong, but it means I can do the numbers in my head.)) To compensate for this, you normally get a better yield rate if investing for longer periods of time. So instead of getting $150 in ten years, you might get $155 (5.5%). So the yield curve has time on the X axis, and %-return on the Y axis.
In 2022, the yield curve inverted. This means that instead of getting better rates for longer amounts of time, you get worse rates. As of writing, the best rates are 2-months (5.5%) and if you give your money away for 10 years, a longer period, you get a worse rate (4.39%).
This is like they're playing hot potato with the money. 'yeah I'll take it for 2 years but I don't want to be stuck with your money for 10 years.' Like what; I'll take your money for 10 years and invest it in short term bonds and take the difference I don't know.
I'm not an economist so I don't understand why this is happening. I thought it was a fluke resulting from high interest rates in 2022 and expected it to correct itself but it hasn't. I also have no idea what the implications of this are.