S&P 500 could fall 40% as yield curve inverts, says analyst of one of 2018’s best hedge-fund returns

Crescat’s Costa says number of inverted yield spreads in the Treasury market spells trouble for stocks

Stock investors should heed the warning emanating from the bond market, says at least one hedge-fund manager, as the yield curve staged a stunning inversion Friday.

“I think people are going to be surprised where the S&P 500 is trading at the end of the year. We’re going at least for a 40% decline from the S&P’s top,” Otavio Costa, a macro analyst at Crescat Capital, a hedge fund that oversees $52 million, told MarketWatch in an interview.

The analyst of the investment firm, says the inversion of the yield curve, where short-dated yields rise above their longer-dated peers, signals an ignominious end to a 10-year bull run for the S&P 500 index, which bottomed in March of 2009 but has mounted a record-long rally, by some measures, since that point.

Read the full article by Sunny Oh at Marketwatch

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