Late last week investors were in a panic over news that the U.S. 10-year Treasury experienced a yield curve inversion. This indicator suggests that there is a 25-30% chance of recession in the next 12-18 months. The yield curve inversion, combined with concerns over slowing growth and global trade issues, has generated anxiety in the investing world.
Does that mean you should stay away from the iShares Core S&P US Total Market ETF (TSX:XUU)? The ETF has climbed 10.9% in 2019 as of early afternoon trading on March 29.
Shares managed to finish 2018 in the black even as the broader market was hit with major turbulence to close out the year.
Looking back to recent history, stocks have managed to post peaks after a yield curve inversion. This was most notable in 2007, although this was followed by some of the worst carnage investors have experienced in the modern era.
Payroll growth has continued to slow in the United States, while retail sales were disappointing to close out 2018.
The 2006 yield curve inversion occurred amidst a more positive economic environment, at least if we go by the fundamentals at the time.
This has been the second-longest expansion in modern U.S. history, which should keep investors very cautious as headwinds build up. It is too dangerous to pile into a financials-heavy ETF like this right now.
