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What Does the Yield Curve Say About the Economy?

Updated: Dec 10, 2019

The kids are back in school, the weather is getting a bit chillier, and in some parts the leaves are starting to turn.

It was a wild summer in the global capital markets with the threat of global recession being touted as just around the corner.

One of the harbingers of the looming malaise, was the concerted drumbeat that the “inverted yield curve” was predicting a U.S. recession and it could start at any moment. That sentiment saw almost daily wild swings on the U.S. equity markets, with the Dow Jones index dropping by 800 points in one day.

And yet today, the Dow Jones is less than 100 points from its all time high.

I thought it would be a good time to share this article by Sonai Desai, CIO at Franklin Templeton. In my opinion, she provides excellent perspective on the predictive power of the yield curve and where the global economy is heading in the near future.

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