Consumption disruption in 2019?
The U.S. consumer has been a significant contributor to domestic economic growth in 2018. Will consumer consumption be hit by inflation in 2019?
There has been increasing focus on the possibility of an inversion in the yield curve, which has been a precursor to every modern-era recession. We believe the yield curve will stay flat for the foreseeable future, with no downturn in the U.S. economy on the horizon.
There has been increasing focus on the possibility of an inversion in the yield curve, as one section of the yield curve inverted for the first time in more than 10 years, with the yield on 5-year notes falling below 3-year notes. However, the recent inversion occurred in only one part of the yield curve.
The spread in yields between the 2-year and 10-year U.S. Treasury notes has tightened in the past year based on several factors, including the expectation that the Fed will steadily increase interest rates. In early December, when one part of the yield curve briefly inverted, the spread between 2- and 10-year yields was only 11 bps, with the 2-year at 2.80% and the 10-year at 2.91%.
While an inverted yield curve has been a precursor to every modern-era recession, a flat yield curve, on the other hand, does not seem to have much predictive power. We believe the yield curve will stay flat for the foreseeable future with no downturn in the U.S. economy on the horizon.
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The opinions expressed are those of Ivy Investment Management Company and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through December 2018, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial needs, risk tolerance and time horizon.