NEW YORK – The Dow Jones Industrial Average sank by 800 points Wednesday, indicating the potential forewarnings of an economic recession.
Investors are in flux as the global economy has taken a substantial hit.
There is a growing concern for investing in the immediate present resulting in heavier long-term investments. This results in an “inverted yield curve.”
An inverted yield curve means that investors have begun losing faith in the short term economy, instead, opting to place their money on safer 10-year bonds.
To cover this loss, the U.S. government has begun paying a higher rate on short-term bonds to attract buyers than that of the 10-year bond.
Typically, the government will pay out a higher rate to attract investors for its long-term bonds. This is to offset the risk involved with having your money tied up for longer periods of time as opposed with shorter bonds that assume less risk.
This anomaly has preceded almost every recession.
This economic tumble follows a brief hiatus between the United States and China, who are in a current trade war.