Every so often, the U.S. Treasury bond yield curve “inverts,” as it has recently, with short-term Treasury bills yielding less than their long-term counterparts. Since past inverted U.S. yield curves have usually been followed by U.S. recessions, we tend to hear about them. In an April 30th GRBJ piece, Anastasia Wiese, JD, CFP® discussed being cautious about lending any one economic indicator excessive predictive powers, especially with respect to your disciplined investment strategy.
What is the yield curve, and why do we have one? It’s basically a graph that tracks earnings on all U.S. Treasury bills ranging from short- to long-term. While there’s a great deal of data packed into it for economists to assess, many view it as a simple gauge of economic growth, with a bit of forecasting capability on that subject. Anastasia’s article offers additional insights into the kinds of signals to look for with respect to the Gross Domestic Product (GDP), the Federal Reserve’s interest rate adjustments, and overall U.S. lending markets
But that’s the economy. Investors are not economists, nor do you need to be to earn a market’s returns by patiently participating in its long-term growth. Anastasia concludes: “Wild
speculations or extreme perspectives are not thoughtful responses to changes in the market. It is
important to construct, implement and follow an investment strategy that you feel comfortable with, regardless of the ups and downs in the market.”
We would be happy to offer additional insights into how the yield curve and other economic indicators relate to your personal investments. Give us a call, and we’ll continue the conversation.