We find that
flat curves signal future increases in yield.
A flatter curve signals expectations for a slowing economy, and better times ahead for growth stocks, especially larger ones.
Not exact matches
A
flatter curve, when the 2 - year yield for instance, rises closer to the 10 - year, could
signal a weakening economy in the future.
To some extent, stock market action also implies expectations for slower economic growth, though interest rate
signals, such as a
flat yield
curve, are more suggestive of slow growth than stock market action is, and we've yet to see a substantial widening of credit spreads that would suggest imminent recession.
But by overweighting highly cyclical companies with the global yield
curve already so
flat, investors must believe that the yield
curve has lost all of its ability to
signal slower growth ahead.
When you start to see the yield
curve flatten or even invert, meaning short - term rates become equal to or higher than long - term rates, and the line either becomes
flat or sloped lower from left to right, then that usually
signals trouble ahead in terms of a recession and lower market prices.
But we acknowledge that some unusual factors are driving the
curve flatter in the post-recession era, and they might not
signal slowdown or impending recession:
Gold prices have come well off their highs, Treasury yields keep dropping (although the yield
curve isn't
flat enough to
signal a «definitive» deflationary environment out into the future), and even Federal Reserve officials are hinting at fears of deflation.