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The Yield Curve Is Not Forecasting A Recession

Published Sat, 01 Dec 2018 12:41:12 -0500 on Seeking Alpha

By now, most anyone who keeps up with financial matters knows that a flat or inverted Treasury yield curve is a good predictor of an impending recession. I've blogged extensively on this subject for almost 10 years. Recently, a few industrious pundits have found evidence that the front end of the Treasury curve is "close to flat." While it's hard to argue with their facts, an almost-flat curve is not the same as a flat or inverted curve. The latter occur only when the market looks into the future and sees good evidence that the Fed will no longer tighten policy and will very likely ease policy at some point. We're not there yet.
Here's a quick recap of where the yield curve stands:
Chart #1

Chart #1 shows us what the market has thought the target Fed funds rate will be in December of next year. One year ago, on the left end of the chart, the Fed funds futures market expected the funds rate to be 2.0% by December '19; it now expects the funds rate will be 2.7% by December of next year. That is essentially equivalent to two more Fed tightenings, from the current 2.25% to 2.75%. Currently, the market does not expect the Fed to do anything more beyond December '19. "Two more rate hikes and the Fed is done" is the current meme. That implies that the economy is quite likely to continue growing for the foreseeable future, but not at a very impressive (nor worrisome) pace. Note that expectations for the future target rate have... 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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