We have had an inverted yield curve since November of 2022. It now appears to be on the verge of “un-inverting”. A rate cut by the Fed (which is anticipated) could do it.

Yield Curve Trends & Economic Predictions

Traditionally, inverted yield curves have been interpreted by economists as a presage for a recession. Currently, unemployment remains low, inflation seems to be taming, consumers are still spending, and GDP growth is still positive. Offsetting that, however, national credit card debt and delinquencies are high and household savings are low; geopolitical events are still creating headwinds with the Russia-Ukraine and Israel-Hamas wars grinding on interminably; and the upcoming U.S. presidential election has the potential to create an economic disruption as well.

There is a significant lag between Fed rate changes and impacts on the economy. This un-inversion implies that either: the Fed is pulling off their quest to bringing the economy in for a soft-landing; or the rate reductions are too late and we are headed for an economic downturn.

Stay Tuned.