Weekend reads: the slowing housing market and inverted yield curve signal a coming recession

Also, the case for buying Tesla’s stock and how to plan for retirement

It is human nature to fear missing out as prices skyrocket, But all bubbles burst eventually.

Ian Shepherdson of Pantheon Macroeconomics predicts a 25% decline in U.S. home sales. What will that do to prices? Weigh in with your thoughts.

A classic signal for a recession

On March 24, the yield on five-year U.S. Treasury notes was 2.40% and the yield on seven-year notes was 2.43%. Both were higher than the 2.38% yield on 10-year Treasury notes. Normally, the longer the maturity, the higher the yield on bonds with similar credit risk.

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A counterargument for bank stocks

While the Treasury yield curve for 5-, 7- and 10-year notes has been inverted, the spread between yields on 3-month Treasury bills and two-year Treasury notes has widened considerably. This is good news for banks, as loans reprice at higher interest rates while the cost of deposits remains low.

Sam Peters of ClearBridge makes the case for bank stocks as industry profitability increases and credit quality remains strong.

Is Tesla’s stock cheap?
Tesla CEO Elon Musk with a Tesla Model Y. AFP VIA GETTY IMAGES

Shares of Tesla were down 18% through March 24 from their closing high on Nov 4. The electric-car maker’s factory in Berlin opened this week and is expected to add 500,000 units to the company’s annual production capacity.

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Wedbush analyst Dan Ives, a longtime Tesla bull, believes Tesla’s stock has been oversold.

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