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The Predictive Power of Yield Curve Inversions

Wells Fargo Investment Institute - April 03, 2019

Key Insights

  • In recent weeks, the Federal Reserve (Fed) has turned decidedly dovish regarding the monetary outlook. We think that the rate hike cycle likely has come to an end.
  • Some market participants now are concerned that a near-term yield curve inversion could signal impending U.S. economic weakness ahead. The Treasury yield curve has been a powerful predictor of recession in past economic cycles.
  • While we believe that economic growth will continue at a moderate pace, the risks are building that the economic expansion may slow more than expected. We are at a key inflection point, and we believe that the yield curve merits close monitoring.

Download the report (PDF)