Not Everyone Is Concerned About the Yield Curve Inversion

The yield curve inversion is at the top of everyone’s mind. As a precursor to the past several recessions, the yield curve inversion has become a telltale sign of an upcoming downturn. However, this time it could be different. Shlomi Ronen of Dekel Capital isn’t as concerned about the inversion, noting that this cycle has many unique characteristics. This could just be another one of them.

“We are in a world with negative long-term yields, which is something new. We are in a world where all of the major European yields are negative at this point. That is providing some pressure that is unrelated to the US economy to the long end of the yield curve,” Ronen, managing principal at Dekel Capital, tells GlobeSt.com. “We are also in a world where we have a very active Fed. Last week, they reduced short-term rates and there may be another rate reduction this year. That will again lower the short-term rates. Those two things, taken into context of the inversion are different this time.”

Thanks to negative bond yields in Germany and Japan, US treasuries are attractive, and Ronen adds that the economy overall is healthy. “We could still be headed to a recession, but the economic data that we have is still okay,” he says. “The economy is continuing to plug away at the 2% GDP growth rate that the Fed is targeting.”