An Overreaction to a Test of Yield Curve Inversion
There has been a lot of concern about the inverted Treasury yield curve and the historical belief that it portends an actual economic recession. Our central case is that the concern about the inversion is an overreaction, driven from a misunderstanding of some of the key factors that have triggered the inversion. We expect the Fed will cut rates further this year, potentially at the September meeting and even perhaps an additional cut at the December meeting. We continue to believe that such additional rate accommodation will be supportive of continued US economic growth–not a recession.