Quick explainer of the inverted yield curve and the importance of the bond market

But the yield curve has inverted for Two-Year Treasurys, which means short-term government bonds have a higher yield—are performing better—than long-term government bonds (in this case, the 10-Year Treasury). Those government bonds set the stage for the rest of the bond market. And the bond market as a whole sets the stage for the overall economy. “The bond market is one of the most powerful predictors of the economy and the direction of the stock market,” said Riley Adams, a CPA who blogs at Young and The Invested.

And this has investors freaking out, because in the past, an inverted yield curve indicates a recession is on the way. So people are preparing themselves for an economic downturn by scooping up less risky investments.

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