Capital Markets: Observations & Insights

Yield Curve Flattens ​ Performance

• During the first quarter, the Treasury yield curve, or spread between the 10-year and 2-year Treasury yields, flattened • While an inversion in the curve often signals a recession ahead, we believe 1) the very low level of interest rates is distorting its signal and 2) equity returns are often strong after inversion

Yield Curve Flattens

Equity Performance After Initial Yield Curve Inversion

4%

31%

27%

Average is 22%

3%

21%

2%

1%

7%

0%

-1%

1986

1988

1990

1992

1994

1996

1998

2000

2003

2005

2007

2009

2011

2013

2015

2017

Source: FactSet as of 3/31/19. Yield curve represented by 10-year less 2-year Treasury yield (monthly data).

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