Monday, 25 March 2019

US yield curve inverts but maybe not yet time to panic

The US yield curve has inverted and some analysts think that is a signal for a recession.

“Yield curves are responding to what they see, to what I believe is a global economic slowdown,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “You don't see this kind of move in curves, not just here but everywhere, unless you get one.”

David Rosenberg, chief economist and strategist at Gluskin Sheff, said that “it would be foolish to disregard this bond curve move entirely”. He also noted that the real yield on a 10-year note has collapsed to a 14-month low of 0.56 percent, lower than during the 2008/09 Great Recession.

Nevertheless, Ed Yardeni of Yardeni Research thinks that it is likely that “the yield curve is signaling weak global economic growth and low inflation without necessarily implying a recession in the US”.

Also, history suggests that it is not time for stock investors to panic.

According to a Credit Suisse analysis last year, stocks rose about 15 percent on average in the 18 months following inversions and tends to turn only about 24 months after the yield curve inverts.

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