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Latest Issue

The Misunderstood Flattening Yield Curve

By John Mauldin

December 14, 2018

Breathless Reporting
An Inverted Yield Curve Is Just a Fever
Early Predictor
Recession Probability
A Little Time
Cleveland, San Francisco, Boca Raton, and SIC

Everybody is suddenly talking about the inverted yield curve. They’re right to do so, too, but alarm bells may be premature. Inversion is a historically reliable but early recession indicator. The yield curve isn’t saying recession is imminent, even if it were fully inverted, which it is not.

What we see now is really more of a flattened yield curve, with a smaller but still positive spread between short-term and long-term interest rates. That’s not normal, but it’s also not a recession guarantee. However, when we combine this with assorted other events, it adds to the concerns.

I’ve been writing in this letter about negative yield curve since 2000, when the inverted yield curve said there was a recession in our future and I called a bear market in equities. Ditto for 2006, though that time the yield curve inverted long before the stock market turned. Today, we’ll look at what the yield curve is really telling us.

Before we go on, let me give you a special invitation. Next week we’re opening up Alpha Society membership for a very limited time. If you don’t know, the Alpha Society gives you the best, most exclusive access to me and all our Mauldin Economics research. For one low price, you get lifetime subscriptions to all our premium services, plus some very attractive additional benefits.

To keep it exclusive, we open Alpha Society membership only occasionally. This year I want to reward our most loyal readers with something different: the Alpha Society Priority List....

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