Source: Markets Insider
Investors should be concerned about yield curve inversion and Fed rate hikes but do not point to a recession in the US economy, according to JPMorgan’s Marko Kolanovic. DXY down -0.81%, EUR USD up +1.04%
- A yield curve inversion, where short-term interest rates are higher than longer-term interest rates, has historically signaled that the economy is headed to a recession.
- In recent weeks, the curve of the 2-year and 10-year Treasury rates has stagnated significantly after the Fed hiked rates for the first time since 2018.
- The 2-year yield now stands at 2.30%, only 18 basis points away from the 2.48% 10-year yield.
- On a note, Kolanovic stated that the inverted yield curve was a good cycle signal that it would show financing conditions have become highly restrictive, but it is not the case at the moment.
- Kolanovic does not expect a Fed rate hike to hamper the companies’ ability to raise debt at cheaper interest rates.