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Inverted U.S. Yield Curve? Recession? Not So Fast

Published Wed, 15 Aug 2018 12:29:38 -0400 on Seeking Alpha

By Eric Winograd
Many investors have started to scrutinize the shape of the US Treasury yield curve, worried that a potential yield-curve inversion would mean imminent recession. In our view, things aren't that simple.
The yield curve has flattened considerably since the Federal Reserve began raising short-term interest rates. Long-term rates aren't rising nearly as fast, leaving 10-year US Treasury yields only about 0.25% higher than two-year yields.
In past economic cycles, an inverted yield curve - with 10-year yields dropping below two-year yields - has preceded recessions. If the yield curve does invert in the near future, does it mean trouble is right ahead for the US economy, or could this time be different?
A Useful Signal - But Certainly Not a Perfect One The logic behind the inverted yield curve as a recession indicator is simple: if long-term yields are lower than short-term yields, the market's view is that growth will slow in the coming years. More often than not, that view has been right. An inverted curve has preceded every recession in the post-WWII era.
But the track record is by no means perfect (Display).

In some cases, the US yield curve inverted but wasn't followed by a recession. In the late 1980s, for example, the yield curve inverted and then steepened again, before inverting again later on before recession. The curve also inverted very briefly in the late 1990s, too, and again in 2005-2006.
Even when a... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
CORNERSTONE TOTAL RETURN FUND 11.46   0.0 0.00 2.74 22.07
ZWEIG FUND 10.83   0.0 0.00 1.44 13.38
LIBERTY ALL STAR EQUITY FUND 6.50   0.0 0.00 0.82 9.98
SPDR DOW JONES INDUSTRIAL AVERAGE ETF TRUST 272.28   0.0 0.00 5.63 2.06
PROSHARES ULTRASHORT S&P 500 29.83   0.0 0.00 0.00 1.95
SPDR S&P 500 ETF 297.74   0.0 0.00 5.42 1.80
POWERSHARES QQQ TRUST SERIES 1 192.20   0.0 0.00 1.49 0.77

CORNERSTONE TOTAL RETURN FUND - CRF
CORNERSTONE TOTAL RETURN FUND - CRF  


Older articles featuring Cornerstone Total Return Fund (CRF):
Negative-Yielding Debt: Monetary Contagion Spreads
The Dollar, High-Yield Bond Market And S&P 500 Revenue Growth
Two Yield Spreads Are Better Than One For Business Cycle Analysis
Equity CEFs: Where's The Beef In The Delaware Dividend & Income Fund?
Of Slopes And Flops: The Yield Curve Inversion
When A Yield Curve Inversion Means Recession
Ignore The Yield Curve, They Said...
Is The U.S. Yield Curve Signaling A U.S. Recession?
Short And Sharp: Yield Curve Inversion - A False Positive?
Weekly Edge: Yield Curve Sends Mixed Signals

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