Preparing your portfolio for recession in a flattening curve environment

Happy May Day! Despite the defensive posture the title of this post evokes, I am bullish on the US economy. And as a result, I am not bearish on risk assets, despite the flattening yield curve. I believe recession is not imminent. And as such, we have ample time to prepare our portfolios for an eventual bear market. Let me explain below.
The basics of the Treasury curve
I started talking about this yield curve flattening - where the premium investors receive for holding longer maturity Treasury bonds decreases - about six months ago. The gist of that post was that people were overly concerned about curve flattening. I am more concerned now at a 2-10 year Treasury spread of 45 basis points than I was at a 70 basis point spread in November. But the big takeaway from that post still holds: fl...


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