3 Reasons Stocks Can Rise As Yield Curve Inverts

• Investors are treading carefully after the 10-year/2-year yield curve briefly inverted on Tuesday.
• An inversion of the yield curve is widely viewed as a leading indicator that the economy is on the verge of a recession.
• But Fundstrat’s Tom Lee gave three reasons why stocks are poised for more upside despite the inversion.

A brief inversion of the widely followed 10-Year and 2-Year yield curve on Tuesday set off alarm bells for investors, as an inversion is widely viewed as a reliable leading indicator that the economy is on the verge of entering a

recession

.

The yield curve inverts when short-term interest rates move higher than long-term interest rates, and previous inversions have occurred months before the 2020, 2008, and 2001 recessions.

But Fundstrat’s Tom Lee gave three reasons why stocks likely have more upside ahead despite the inversion, and it has to do with the difference between nominal interest rates and real interest rates, which accounts for the current rate of inflation.

First, while nominal interest rates inverted on Tuesday, real interest rates didn’t. In prior yield curve inversions, like in 2006 and 2019, both the nominal and real curve became inverted. “Real interest rate curve is still in normal…