A recession warning is triggered on the bond market. However, certain stock sectors can still hold.
In some sectors, however, some sectors perform better than others. In the first three months after the inversion, insurance and industrials recorded the strongest average outperformance. Semiconductors and durable consumer goods have been the biggest delays in the past.
One year after the reversal of the yield curve, however, there is a clearer split. Defensive stocks such as health care equipment, pharmaceuticals and insurance outperformed over the last 12 months after the yield curve reversed. A defensive stock has a constant demand for products and is not normally associated with the rest of the business cycle. They tend to withhold a constant dividend and relatively stable returns regardless of stock market conditions.
Depending on market conditions, "cyclical" stocks tend to underperform, according to Credit Suisse. Cars and technical hardware are among the laggards 12 months after the yield curve was reversed.