Much has been written about trying to predict the next recession. The pundits look at the yield curve, credit conditions, manufacturing and sales data, employment figures, business sentiment, and a whole host of other factors. Continue reading “Predicting an economic downturn (don’t even try)”
Tag: yield curve
The yield curve refers to the difference in rates between Treasuries with short-term and long-term maturities. Most of the time, long-term yields are higher because investors typically demand higher returns for locking up their money for a longer period. But when short-term rates are higher – known as an “inverted” curve – it’s a sign economic growth is expected to ebb, with policy rates eventually falling to cushion the slowdown.
Looking at the right yield curve
The recent inversion of the yield curve (10-year and 3-month U.S. Treasury yield difference), historically a precursor to falling equity prices, may be misleading. What may be more important is to understand that the typical delay from inversion to recession is eighteen months. Continue reading “Looking at the right yield curve”
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