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The Yield Curve Inverted

Published Sat, 23 Mar 2019 07:12:40 -0400 on Seeking Alpha

The Financial Times reports that the yield curve inverted, albeit by just 1 basis point:
Uh oh
Does this mean a recession is more likely than before?
Yes.
Does this mean that a recession is likely in the next 12 months?
Probably not.
Does this mean that monetary policy is too tight?
Hard to say.
In my view, the current situation reminds me most closely of 1998, when the US economy was pretty strong at a time when the global economy was weakening. That year also saw a mild inversion, which turned out to be an incorrect recession forecast:
Ah, more reassuring
In its entire history, the US has never experienced a soft landing, in the sense of having a recovery extend for many years after unemployment had fallen close to the natural rate. Since unemployment has fallen close to the natural rate, that fact alone should make us worried. On the other hand:
Australia and the UK have experienced soft landings in recent decades. In previous US expansions, you didn't have MMs beating the drum for stable NGDP growth, level targeting. (Yes, I'm joking.) When unemployment falls to the natural rate, problems are almost always just around the corner. In 1966, the yield curve inverted when unemployment fell below 4%, and again there was no recession. But there was a problem just around the corner - high inflation.
So low unemployment is a very dangerous time for the US. We are a clumsy country, which fails to achieve soft landings. That's the real... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
CORNERSTONE TOTAL RETURN FUND 11.38   0.0 0.00 2.48 22.00
ZWEIG FUND 10.98   0.0 0.00 1.44 13.14
LIBERTY ALL STAR EQUITY FUND 6.38   0.0 0.00 0.65 10.30
PROSHARES ULTRAPRO SHORT S&P 500 25.26   0.0 0.00 0.00 2.32
SPDR DOW JONES INDUSTRIAL AVERAGE ETF TRUST 272.32   0.0 0.00 5.67 2.10
PROSHARES ULTRASHORT S&P 500 28.97   0.0 0.00 0.00 1.97
SPDR S&P 500 ETF 301.29   0.0 0.00 5.42 1.82
POWERSHARES QQQ TRUST SERIES 1 193.23   0.0 0.00 1.49 0.78

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


Older articles featuring Cornerstone Total Return Fund (CRF):
This May Not Be Your Father's Inverted Yield Curve
Pay Attention To The Message The Yield Curve Is Sending
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?

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