Steep curves speed nominal economic activity, and
flat curves slow nominal economic activity.
Not exact matches
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.
A
flatter curve signals expectations for a
slowing economy, and better times ahead for growth stocks, especially larger ones.
When the economy is transitioning from expansion to
slower development and even recession, yields on longer - maturity bonds tend to fall and yields on shorter - term securities likely rise, inverting a normal yield
curve into a
flat yield
curve.