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Don't Freak Out about the Yield Curve

"There are reasons to be concerned.  The global economy is slowing. The US economy has slowed. Current policy (especially on trade) is a drag on growth. 


But I wouldn't freak out about the yield curve. 


...When the spread turned solidly negative in 2000, the Fed was raising rates.   That would be a more concerning scenario. 


Also, with overall yields so low, I'm not sure this indicator is as useful as it has been.   The yield curve is indicating economic weakness, but I'm not currently on recession watch. 


...In general, I find new home sales and housing starts a better leading indicator for recessions than the yield curve.   And Year-to-date (through June), new home sales are up 2.2% compared to the same period in 2018. Not indicating a recession!" 


(Don't Freak Out about the Yield Curve dated 08/14/2019 by Bill McBride of Calculated Risk)


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