Downward facing yield curve

CFA Level III Economics
#1

This tipically mean that long term bonds are not going to be attractive and equity market has access to money at lower interest which supports growth in long term.

So I assumed that investor should overweight equity.

However, according to economic analysis says, downward sloping yield curve will typically mean economy is likely to contract and bond will outperform equity so investor should overweight bonds.

What am I thinking wrong?

#2

interest rates are going down - so bond prices would increase.

#3

thanks… not sure what I was thinking.

#4

The yield curve inverted 7 times in the last 50 years and 6 of those times a recession occured. It’s a very good leading indicator.