When Was the Last Time the Yield Curve Was Inverted?

In the summer of 2019, the yield curve briefly inverted between short-term and long-term Treasury yields. However, the exact dates and the previous times of an inverted yield curve are not as interesting to me as the implications for consumer and business spending trends.

Data and Current Status

There is nothing like data from the source. The US Treasury's Daily Treasury Yield Curve Rates provide a wealth of information. As of today, the yield curve is strongly inverted between three months and three years, indicating that short-term Treasury yields are higher than longer-term yields.

Trends in Consumer and Business Spending

Despite the inverted yield curve, consumer spending has been rising, while business spending remains more stagnant. This divergence in spending behaviors is worth analyzing. Consumer spending often reflects confidence in the economy and the health of the job market, whereas business spending tends to be influenced by long-term economic outlooks and investment opportunities.

Some key factors to consider include:

The overall health of the job market and consumer sentiment. Policy changes and their impact on business operations and investment. Market expectations and perceptions regarding future interest rates and economic growth.

Political Implications and Market Prospects

The upcoming election and potential shifts in political control, particularly in Congress, might influence corporate spending behaviors in the next year. If the Republicans take control of Congress, it could potentially provide a boost to corporate spending, potentially extending the current bull market for another year.

Republicans and Democrats often have different economic policies that can significantly influence corporate investment. Republican policies tend to focus on tax cuts, deregulation, and lowering trade barriers, which could encourage business spending. Conversely, a Democratic Congress might lean towards more regulatory oversight and potentially higher taxes on corporations, which could dampen investment.

Conclusion

The inverted yield curve and its implications for consumer and business spending are complex topics that warrant careful analysis. As of today, the yield curve is showing strong inversion, yet consumer spending is robust while business spending remains stagnant. The upcoming political landscape could play a significant role in shaping these trends in the coming months.

For investors and businesses, staying informed about these economic indicators and political developments is crucial for making informed decisions.