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Jun 09

What about the yield curve?

  • June 9, 2022
  • CWM Investment Team
  • Sauro Locatelli

It seems like no one is talking about the yield curve any more. During the last week of March, when the 10-2 year treasury spread inverted very briefly, roughly 3,800 news articles mentioning the yield curve appeared on Bloomberg (and we wrote our fair share on the subject). Last week, there were only about 1,000 such articles. Perhaps it’s because the curve has been stuck in a relatively narrow range for the past two months. I guess “Yield Curve Goes Nowhere Again” is not exactly an attention-grabbing headline, but perhaps it should be. Since March, the Fed has hiked rates by 75 bps, and the market expects them to hike rates again by 50 bps next week and by another 50 bps next month. Given such aggressive pace of tightening, the fact that the yield curve hasn’t gone anywhere is remarkable, and it is very good news for the economy and the stock market.

Source: Congress Wealth Management, Bloomberg, as of 6/9/2022

As we have noted before, the economy can handle a moderately flat yield curve just fine. It is only when the yield curve inverts that the economy significantly slows down and the stock market runs into trouble. In order to engineer a so-called soft landing, the Fed has to walk a fine line between hiking rates just enough to rein in inflation but not enough to cause a recession. The longer the yield curve remains moderately flat, the higher the chances that they will be successful. 

Source: Congress Wealth Management, Bloomberg, as of 6/9/2022

Sauro Locatelli CFA, FRM™, SCR™
Director of Quantitative Research


Congress Wealth Management LLC (“Congress”) is a registered investment advisor with the U.S. Securities and Exchange Commission (“SEC”). Registration does not imply a certain level of skill or training. For additional information, please visit our website at congresswealth.com or visit the Investment Adviser Public Disclosure website at www.adviserinfo.sec.gov by searching with Congress’ CRD #310873.

This note is provided for informational purposes only. Congress believes this information to be accurate and reliable but does not warrant it as to completeness or accuracy. This note may include candid statements, opinions and/or forecasts, including those regarding investment strategies and economic and market conditions; however, there is no guarantee that such statements, opinions and/or forecasts will prove to be correct. All such expressions of opinions or forecasts are subject to change without notice. Any projections, targets or estimates are forward looking statements and are based on Congress’ research, analysis, and assumption. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. This note is not a complete analysis of all material facts respecting any issuer, industry or security or of your investment objectives, parameters, needs or financial situation, and therefore is not a sufficient basis alone on which to base an investment decision. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this note. No portion of this note is to be construed as a solicitation to buy or sell a security or the provision of personalized investment, tax or legal advice. Investing entails the risk of loss of principal.

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    Congress Wealth Advisor Solutions (CWAS) is a division of Congress Wealth Management, LLC (CWM), which is a registered investment advisor with the U.S. Securities and Exchange Commission. For additional information, please visit the Investment Adviser Public Disclosure website by searching with CWM's CRD #310873. Investment Advisory services are offered and rendered through CWM. CWM acquired Pinnacle Advisory Group, Inc. (Pinnacle) on April 30, 2021.