Dow Falls 800pts, Credit Suisse Hints Recession to Hit 22 Months after Treasury Inversion

On Wednesday, August 14, 2019, Wall Street faced a huge selloff as the 10-year yield curve in U.S. Treasurys inverted at 1.623%, lower than the 2-year yield at 1.634%, triggering fears over the state of the U.S. economy hitting a recession.

The last inversion investors had seen of this part of the yield curve was in December 2005, a little over two years before a recession brought on by the financial crisis hit.

Credit Suisse reported that there have been five inversions of the 2-year and 10-year yields in U.S. Treasurys since 1978. Although there is a significant lag, a recession always occurred afterward on an average of 22 months after the inversion.

 

Over the night, Dow Jones dropped 800.49 points or 3.05% to 2,5479.42,marked its worst drop in 2019 and the fourth-largest point drop of all time. The S&P 500 plunged 2.93%, and Nasdaq fell 3.02%.

In European markets, DAX fell 2.19%, FTSE lost 1.42%, STOXX 600 dipped 1.68% and CAC 40 plunged 2.08%.

In the morning session on Thursday as of 8:50 local time in Thailand, Nikkei fell 1.72%, SSEC plunged 1.56%, HSI downed 1.36%, ASX lost 1.92% while Kospi closed for the day.

SET closed at 1,619.45 points, decrease 0.78 points or 0.05% with a trading value of THB 71.27 billion.