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How to Better Understand What an Inverted Yield Curve Means

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Alright, folks, we've all seen the headlines...

But what does it really mean when a yield curve inverts and how should the average investor approach a yield curve inversion?

Michael Reynolds, investment strategy officer at Glenmede, sat down with TheStreet to talk about what investors need to know about the yield curve inversion and why it matters...or doesn't.

"So you know...we try to compare the yield on shorter-term bonds and longer-term bonds. When you see shorter-term bonds yield more than longer-term bonds, that is historically been a signal that a recession is coming. Now this time around we're sort of recognizing that there's perhaps some dislocations in the market on a global scale that have been messing with the signal that we've been getting there," said Reynolds. "That is probably not giving the traditional signal recession that it has in the past. I think part of that is global demand with negative yields across the globe at this point with a German yield curve all the way out to 30 years, you're getting negative rates. You're basically paying for the privilege to lend the German government money at this point. Investors need yields and when they're looking for yields, the U.S. is the only game in town."

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Editor's Note: This video has been updated to reflect Glenmede's name.

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