Real Three-month Yield vs. Recessions Historically prior to every recession, the three-month yield exceeded inflation by almost 200 basis points since 1960. Today, the real three-month yield (adjusted for inflation) is just above zero. If history helps us to predict the future, then this cycle should not end any time soon. Source: Bloomberg, Myron Scholes
US Yield Curve Inversion and Recessions This interesting chart shows the US yield curve inversion (10y-2y spread) and recessions. Historically, by ending the rate hiking cycle before an inversion, the expansion has still some legs and the next recession is postponed. Source: J.P. Morgan Asset Management “Guide to the Markets” for Q2 2019
Real GDP vs. Real Fed Funds Rate One of our most favorite charts is the real GDP vs. the real Fed funds rate (adjusted for inflation). Historically, recessions begin when the real Fed Funds rate exceeds GDP growth. We are far from that today. So, this cycle should not end any time soon. Real Fed…